Microsoft reports decrease in profits

Redmond (WA) - Microsoft’s earnings report for the fiscal third quarter came in above analyst’s expectations. Legal charges however resulted in a rare decrease of earnings for the company.

The world’s largest software maker posted a profit of $1.32 billion or 12 cents per share on revenues of $9.18 billion for the fiscal quarter ended March 31. While revenues are up 17 percent from $7.84 billion in the third quarter of 2003, revenues are down 38 percent from $2.14 billion.

Microsoft blamed legal charges for the decrease of earnings. The results included charges of $2.53 billion related to a settlement with Sun Microsystems as well as a fine to the EU. Also included was a stock compensation expense of $501 million. Excluding the charge, the profit was 34 cents a share, according to Microsoft. Analysts originally had expected a profit of 29 cents a share, Microsoft had put the numbers in the range of 23 to 24 cents a share last January.

Microsoft’s current balance sheet shows significantly cash reserves. Current cash is listed at $9.3 billion, cash-equivalents and short-term investements are now at $47 billion, bringing Microsoft’s war chest to $56.4 billion (2003 : $49 billion).

"Broad-based demand and solid execution across all our businesses drove outstanding results for the quarter," said John Connors, chief financial officer at Microsoft. "All of our businesses met or exceeded our expectations this quarter with the Client, Information Worker and Server and Tools businesses growing a combined 17%. Overall corporate IT spending continued to improve and we expect to see healthy demand through the end of our fiscal year."

Microsofts expects for the current quarter a revenue of $8.9 billion to $9.0 billion, a two-digit growth from $8.07 billion in the fiscal fourth quarter of 2003. Operating income should be $2.8 billion to $2.9 billion (2003 : $2.19 billion) - an expected growth of about 30 per cent.