Microsoft has announced better-than-expected profits for its fourth fiscal-year quarter ending June 30 of US$559 million, an increase of 50% over the same period last year.
The company has also announced revenues of US$8.76 billion for the fiscal year ending June 30, an increase of 46% over last year. Net earnings totalled US$2.2 billion in fiscal 1996, up 48% over fiscal 1995.
"Wow. This is a fine finish to a fine year. Microsoft grew like a gangly teenager," said Greg Maffei, Microsoft treasurer and vice president of its corporate division in a conference call to financial analysts and reporters.
Microsoft executives attribute the phenomenal growth of the 21-year old company to the launch of Windows 95, which accounted for a 74% increase in the desktop platforms division's revenues during fiscal year 1996, and a 53% increase in the fourth fiscal quarter. "We completed another consecutive year of growth in both revenues and profits led by the success of the Windows 95 operating system, says Mike Brown, chief financial officer for Microsoft. "This is the most excited I have been for Microsoft; the results are a CFO's dream," says Brown.
Microsoft plans to reveal the number of Windows 95 licenses in late August, to coincide with last year's release of Windows 95, says Maffei. But the desktop division is not the only area that announced huge growth. Revenues in the Windows NT licensing division increased 120% in the fourth fiscal quarter and 600% in the fiscal year.
Still, Brown cautions that the NT division hasn't come close to reaching its earnings potential within the company. "NT will be more financially exciting in 1998 than 1997 ... the server story will get better and better in 1998," says Brown, who added that the company does not expect the Microsoft Network to break even until 1997.
The interactive media division, which publishes CD-ROMS and "Slate" magazine, was profitable, but did not reap huge increases like the other divisions, mainly due to a US$42 million investment in MSNBC in the fourth quarter of fiscal 1996. Worldwide, Microsoft had an impressive year of growth as well with an overall growth rate of 58% compared with last year. Revenues from activity in Latin America rose 75%, and revenues in Japan, the Netherlands, Italy and Korea rose over 55% in each country. Overall growth for Europe alone was 36%, despite a slowdown in the PC market on the continent, says Maffei.
Looking ahead to fiscal year 1997, Brown predicts that the largest generator of revenue will be desktop applications, driven by the release of Office 97 in November, and says that Microsoft is committed to high growth in spending for research and development. This last fiscal year, the company had a 67% increase in R&D.
The company's high profits have executives in a hopeful mood. "I can't think of anyone out there that I would want to trade places with right now," says Brown.
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