TechnologyAccounting SoftwareMicrosoft profits tumble on weakened demand

Microsoft profits tumble on weakened demand

Microsoft saw profits drop by 42% in its fiscal first quarter, as the software giant struggled with a weakened market for PCs and was weighed down by $1.2bn (£831m) in investment losses.

It also warned that second quarter results would fall short of expectations. For the three months ended 30 September, Microsoft earned $1.28bn, or 23 cents per share, compared with $2.2bn, or 46 cents per share, in the year-ago period. Sales were 6 per cent higher, at $6.13bn, compared with revenue of $5.77bn in the year-ago quarter.

Microsoft reported a $980m investment loss, which contributed to a $1.24bn after-tax charge. Excluding the charge, Microsoft would have posted a profit of 43 cents a share, above most analysts’ expectations. The company was expected to earn between 38 cents and 42 cents a share on revenues of between $5.9bn and $6.5bn, according to First Call analysts.

John Connors, CFO at Microsoft, said the company’s solid revenue and operating results this quarter were fuelled by strong customer demand for Windows 2000 and .Net Enterprise Servers.

‘While we are looking forward to the upcoming launches of Windows XP, X-box and MSN 7, we also recognise that this is a period of unprecedented global uncertainty that could have an impact on the economy and our business.’

Microsoft said that second quarter revenue would come in between $7.1bn and $7.3bn at the low end of analysts’ expectations.

Meanwhile, second quarter earnings are now expected to come in between 49 and 50 cents per share, Microsoft said, below the 51 cents analysts were predicting.

During a conference call Connors said: ‘We now believe PC shipments will not show any growth from last year and will show a decline for the full fiscal year 2002.’

For all of fiscal 2002, Connors said Microsoft now expects total sales to range between $28.4bn and $29.1bn, while profits for the year will come in between $1.61 and $1.66 per share.

Links

Windows XP to arrive a month early?

Microsoft sales up despite IT downturn

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