Strong PC Sales Help Microsoft’s Results
Microsoft Corp., the world’s biggest software company, said Thursday that increased sales of personal computers buttressed its fiscal second-quarter profit and that it expected PC sales to climb even faster in the next six months.
Microsoft earned $1.55 billion, or 14 cents a share, in the last three months of 2003 as sales jumped 19% to $10.15 billion. The quarterly results were reduced by $2.17 billion, or 20 cents a share, in after-tax expenses for stock-option grants and a program allowing employees to sell their options. A year earlier, Microsoft earned $1.87 billion, or 17 cents a share, after various expenses and charges.
After topping $10 billion in quarterly sales for the first time, the Redmond, Wash., firm said it expected revenue in the year ending June 30 to reach at least $35.6 billion as computer sales flourish. Earnings per share will be 82 cents or 83 cents, higher than previously projected, the company said.
“We’ve seen really strong PC demand in the consumer market and some improvement in information technology spending” by businesses, said Curt Anderson, Microsoft’s senior director of investor relations.
The strong showing follows positive reports from Intel Corp., IBM Corp. and other technology bellwethers.
But Microsoft Chief Financial Officer John Connors warned that revenue growth would slow in the fiscal year that begins in July. He said the company would compensate by keeping costs low.
That forecast echoed comments made by Hewlett-Packard Co. Chief Executive Carly Fiorina. Speaking Thursday at the World Economic Forum in Davos, Switzerland, she predicted worldwide spending on hardware and software would rise no more than 4% this year.
That projection, though more sober than recent reports by market research firms, was seconded by Cisco Systems Inc. Chief Executive John Chambers. “You are going to see the budget conservative this year,” he said.
At the end of 2003, revenue at Microsoft’s three biggest divisions -- those making Windows operating systems for PCs, software for server computers and productivity software including Word and Outlook -- all rose by more than 20%.
Sales at the much smaller MSN Internet service provider rose 19% as advertising increased 47%.
Some investors were disappointed by a shift toward one-time software purchases and away from multiyear contracts for software, service and upgrades. Microsoft shares, which dipped 29 cents to $28.01 in regular Nasdaq trading, slipped to $27.80 after hours following the earnings release.
“Bookings look to be headed the right direction, but you’d like to see subscription bookings,” said Charles Di Bona, an analyst with Sanford C. Bernstein.
Eric Upin, an analyst with Wells Fargo Securities, said that while some customers were balking at long-term contracts, the revenue jump was reassuring.
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Bloomberg News was used in compiling this report.
