• silicon.com
• Management
• CIO Insights

By Will Sturgeon, 16 April 2003 11:04

NEWS Microsoft has beaten Wall Street expectations with its latest results, steaming ahead despite a weak economy and slow technology spending. The software giant reported third-quarter profits of $2.79bn, or 26 cents per share, compared with $2.74bn, or 50 cents a share, a year earlier. In January, Microsoft announced a two-for-one stock split, making the year-ago comparison 25 cents a share if the split is figured in. Revenue rose eight per cent to $7.84bn from $7.25bn a year earlier. Sequentially, sales declined from $8.54bn in the fiscal second quarter. The company said operating income was up 13 per cent, to $3.72bn from $3.3bn a year ago. A consensus of analysts polled by First Call anticipated earnings of 24 cents per share on revenue of between $7.7bn to $7.8bn, and operating income between $3.4bn and $3.5bn. In a statement issued on Tuesday, John Connors, Microsoft CFO, set a cautious but optimistic tone for the company's fourth quarter and for fiscal 2003, which ends 30 June. Connors said: "We reported another quarter of strong revenue and operating income results in a very tough environment." He positioned new enterprise products, due for release in the next six months, to bring in the capital that the company needs to rise above hard times. "We believe that these innovative products will enable our customers to get more productivity and value out of their information technology investments." Connors also set expectations for fiscal 2004 and issued guidance for the fourth quarter, for which Microsoft expects revenue to be between $7.8bn and $7.9bn, operating income to be between $3.1bn and $3.2bn and earnings per share to be either 23 cents or 24 cents. For fiscal 2004, Microsoft projects revenue between $33.1bn and $33.8bn, operating income between $14.8bn and $15.1bn and earnings per share between $1.04 and $1.06. As in previous quarters, Microsoft resisted the downward pull of the economy by way of unearned revenue, which is revenue for software that has yet to be delivered. Unearned revenue accounted for about 26 percent of the company's total revenue during the third quarter, compared with 22 percent of revenue in the second quarter and 23 percent in the first quarter. Money collected through Microsoft's Licensing 6 programme is counted as unearned revenue. In May 2001, the software company announced the programme, under which companies pay up front for products under two-year or three-year 'Software Assurance' contracts.