MS Profits Up Despite Slower Business PC Sales

SAN FRANCISCO (04/20/2000) - Microsoft Corp. came in ahead of analyst expectations today reporting a third-quarter profit of 43 U.S. cents per diluted share, up 23 percent from the year-ago quarter. However, the software maker said demand for business PCs was light during the three-month period, and sounded its customary note of caution for the months ahead.

Net income for the quarter, ended March 31, 2000, was $2.4 billion, up from $1.9 billion a year ago, Microsoft said in a statement issued today. Revenue for the third quarter was $5.7 billion, a 23 percent increase from the $4.6 billion reported in the same quarter of 1999.

The earnings per share of 43 cents compare with 35 cents a share reported in the same quarter last year. Wall Street had expected Microsoft to profit by 41 cents per share, with estimates ranging from 40 cents to 44 cents, according to 24 brokers polled by First Call/Thomson Financial.

"OEM (original equipment manufacturer) revenue was light as demand for business PCs remained slow in the quarter, and we remain guarded about near-term growth," John Connors, Microsoft chief financial officer, said in today's statement. "However, PC demand appeared to pick up late in the quarter, and with the launch of Windows 2000, we are excited about the opportunity to help customers migrate to this new generation of platform products."

Microsoft has shipped more than 1.5 million copies of Windows 2000 since the new operating system was launched in 16 languages on Feb. 17, Jim Allchin, group vice president of Microsoft's platforms group, said in the statement.

Revenue from the South Pacific and Americas region reached $2 billion in the quarter, up from $1.5 billion in the third quarter of 1999. Europe, Middle East and Africa (EMEA) revenue was $1.3 billion, up from $981 million a year ago.

Asia revenue increased to $709 million from $492 million last year.

Revenue from Microsoft's OEM channel increased to $1.7 billion up slightly from $1.6 billion a year ago.

By business segment, revenue from Microsoft's Windows platform division was $2.3 billion, up from $2 billion last year. Productivity applications and developer revenue increased to $2.6 billion from $2 billion last year. Revenue from consumer and other sales totalled $756 million, up from $598 million a year ago, Microsoft said.

Separately today, lawyers in Washington, D.C., filed a private antitrust lawsuit against Microsoft on behalf of all residents of that district who purchased the software giant's Windows 98 operating system. The suit, which is the latest in a string of antitrust class-action lawsuits filed against Microsoft at the regional level, accuses the software maker of charging a "monopoly price" for Windows 98 and seeks unspecified monetary damages.

The results were announced after the U.S. markets closed today. Microsoft's shares on the Nasdaq ended today day at $78.94, up 25 cents from yesterday's market close.

Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080, and on the Web at

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