Macro-profits for Microsoft

For Microsoft , the score so far reads O2K 1, Y2K 0. Thanks to strong sales of the new Office 2000 and despite fears of Y2K conservatism, Microsoft has posted a net income of $US2.19 billion.

For Microsoft , the score so far reads O2K 1, Y2K 0. Thanks to strong sales of the new Office 2000 and despite fears of Y2K conservatism, Microsoft has posted a net income of $US2.19 billion, or 40 cents per diluted share, for the three months ending Sept. 30.

The results belied warnings from company officials over the past several quarters that uncertainty over Y2K, Asian economic troubles, Windows 2000 delays and other factors could slow the company's heady profit margins, which nearly reached 40% for the first time in fiscal 1999 and just topped it this quarter.

Revenue for the quarter totaled $5.38 billion, up from $4.19 billion in the year-ago quarter. Excluding large one-time gains from the recent sale of the Sidewalk city guides ($156 million) and the year-ago quarter's sale of the SoftImage graphics software division ($160 million), earnings were up 37%. With the sales factored in, earnings rose only 29%.

"It does not appear that Y2K has significantly retarded our rate of growth in this quarter," chief financial officer Greg Maffei said during a conference call with analysts and press. "In fact, we may see upside" in the next quarter from large organisations that have completed their Y2K plans early, Maffei said. He predicted good results in coming months thanks to holiday spending, stronger Asian demand and the release of Windows 2000, as well as increased focus on developing and marketing software and services for the portal and new-media space.

"You have to feel good and optimistic about the months ahead," Maffei said. However, he warned analysts not to expect Windows 2000 to drive significant revenue in fiscal 2000, which ends next June 30. Once expected to see the light of day in late 1998, Windows 2000 is expected to make its debut before the end of the year, perhaps as early as the Comdex trade show in November. Microsoft is counting on Windows 2000 - which is not one but a series of operating systems for laptops, desktops and servers - as the company's technology foundation for the next several years.

Revenue by division was as follows: $2.3 billion for operating systems, $2.4 billion for applications and development tools, and $685 million for the consumer and commerce group, which includes the MSN.com portal, the MSN Internet service provider business and related new-media efforts. The company now has $19.8 billion in cash and short-term assets in the bank.

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