Quarterly Earnings Announced

Microsoft revenues for the fiscal 2000 third quarter (ending Mar. 31, 2000) were US$5.66 billion, a 23% increase over the US$4.96 billion reported for the same quarter a year ago. Earnings per share were US$0.43. Revenue was lower than most analysts expected, and Microsoft said the drop was due to slow sales of business PCs through OEM channels. The company warned that the upcoming quarter is a “transition” quarter, as customers wait for a new consumer operating system and server applications, which are expected to ship in late summer or fall. As a result, revenues are unlikely to rise substantially, and expenses may increase, causing a slight decline in earnings per share.

Microsoft’s stock dropped sharply when markets next opened for trading. Many Wall Street analysts filed negative reports on the company’s prospects and several downgraded their recommendations on the stock. Nevertheless, Microsoft CFO John Connors suggested that overall results were strong, and that, as Microsoft’s business grows and the computer market matures, year-over-year increases of 20% or higher will be increasingly difficult to attain. Third-quarter results were close to what Connors predicted three months ago: revenue growth of about 25% and earnings per share of US$0.41.