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News > Technology
Microsoft 1Q beats Street
October 19, 1999: 6:59 p.m. ET

Strong corporate demand for software drives earnings of 38 cents a share
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NEW YORK (CNNfn) - Microsoft Corp. reported a fiscal first-quarter operating profit Tuesday of about $2 billion, easily exceeding Wall Street estimates amid strong demand for its high-margin corporate software.
     The company also uncharacteristically guided analysts to raise their earnings estimates for the following quarter, citing seasonal factors and strong demand as corporate customers complete their Year 2000-compliance programs.
     The Redmond, Wash.-based software firm posted an operating profit of 38 cents a share for the quarter ended Sept. 30. Analysts polled by First Call forecast a profit of 34 cents a share for Microsoft (MSFT). Revenue jumped 28 percent to $5.4 billion.
     The operating results exclude a $156 million gain for the sale of the entertainment city guide portion of the MSN Sidewalk online guide. Including that item, Microsoft's total earnings amounted to $2.2 billion, or 40 cents a share.
     Microsoft outpaced its year-ago results, when it posted an operating profit of $1.5 billion, or 28 cents a diluted share (adjusted for a two-for-one stock split), on $4.2 billion in revenue.
     Microsoft announced its earnings results after markets closed Tuesday.
     Shares of Microsoft fell 1-9/16 to close at 86-5/16 prior to the announcement. Its shares jumped to 90-3/8 in after-hours trade.
    
No Y2K woes

     In typically conservative fashion, Microsoft had previously told analysts that its first-quarter earnings and revenue results would fall off its fourth-quarter pace amid slower PC sales and as consumers and businesses hold back on their software purchases ahead of Y2K.
     But Greg Maffei, Microsoft's chief financial officer, said corporate customers continued to exhibit strong demand for the company's products.
     "We had a really big quarter driven by strong corporate demand for Office 2000, Windows NT Server and BackOffice applications," Maffei said. "It does not appear that Y2K had a significant impact on results."
     Maffei noted that the enterprise edition of the company's Windows NT server -- a high-margin product for large corporate networks -- was Microsoft's fastest growing product during the quarter.
    
Outlook strong

     Maffei said in a conference call that Microsoft could see an upswing in second-quarter revenue as corporations begin to purchase software after they complete their Y2K-compliance programs.
     Analysts' forecasts call for Microsoft to earn 39 cents a share in the second quarter. Maffei, in a statement uncharacteristic of Microsoft, said that estimate is "a little low," though he cautioned analysts not to raise their forecasts above 42 cents a share.
     Maffei noted that the company does not expect the upcoming Windows 2000 operating system -- which the company is expected to introduce by the end of the year -- will add significantly to its second-quarter revenues.
     Maffei also attributed Microsoft's performance to strong PC unit growth, which drives sales of the Windows and Windows NT operating systems.
     "The PC market remains very healthy," Maffei said. "The increase in units drove the vast majority of our revenue increase."
    
Judge (sort of) sets trial schedule

     Separately, the federal judge presiding over Microsoft's antitrust case will issue his long-awaited findings of fact on a Friday evening at 6:30 p.m. ET, though the court did not specify which Friday.
     Trial watchers had anticipated that U.S. District Court Judge Thomas Penfield Jackson would deliver his findings of facts sometime in October. Although a brief statement issued by the court didn't specify when Jackson would issue his conclusions, a District Court official said the findings would not come this Friday.
     Antitrust experts have said the Justice Department, which -- along with 19 states -- sued the firm for broad antitrust violations, likely will meet for another round of settlement talks after Jackson delivers his findings of fact.
     Jackson's findings will give each side a clearer idea of how he will make his final ruling.
     Later this year, Microsoft and the government will present their proposed conclusions of law, followed by Jackson's final decision.Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.