WebTV Write-Off Slows Microsoft Profit Growth
Microsoft Corp. on Monday said its fiscal first-quarter profit rose about 8% over the same period last year, held down by a write-off for the software company’s investment in WebTV.
The earnings report came the same day the Justice Department asked a federal court to impose a $1-million-a-day fine on Microsoft for requiring personal computer manufacturers who want to license Microsoft’s Windows 95 operating system to also license its Internet browser, known as Internet Explorer.
Microsoft’s net income for the quarter ended Sept. 30 was $663 million, or 50 cents a share, compared with $614 million, or 47 cents, a year ago.
Excluding the one-time write-off of $296 million to acquire technology related to the WebTV investment, net income would have been $959 million, or 72 cents a share, an increase of about 55%.
Analysts had estimated Microsoft’s earnings would be 70 cents a share, excluding the write-off for WebTV.
Quarterly revenue grew to a record $3.13 billion, up 36% from $2.3 billion last year.
Stock in the Redmond, Wash.-based company rose 38 cents to close at $132.63 on Nasdaq. The stock had traded as low as $127.50 after the Justice Department disclosure. The earnings report came after the market closed.
Microsoft’s profit growth was off its torrid pace of earlier this year. In the fourth quarter of its fiscal year ended June 30, earnings had risen nearly 90% to $1.06 billion, or 80 cents a share.
Company executives have repeatedly warned that growth would slow because Microsoft is between releases of major new products. Earlier this year, revenue was driven by sales of the Office 97 suite of business application software.
Despite that, “we think it’s a pretty solid quarter across the board,” said Carla Lewis, director of investor relations. She said net earnings topped analysts’ estimates “by a few pennies.”
Microsoft this summer bought WebTV Networks Inc. for about $425 million in cash and stock. Palo Alto-based WebTV sells technology that allows consumers to tap into the World Wide Web through specially equipped televisions.
Microsoft’s major release this quarter was Version 4.0 of its Internet Explorer browser program, but Microsoft distributes that program free. Its next major program releases, an upgrade to Windows 95 and an extensively updated version of the Windows NT operating system for larger computers, aren’t due out until next year.
* DEALT A BLOW
U.S. seeks $1-million-a-day fine against Microsoft. A1
