[Am-info] Microsoft 2Q Income Drops 13%

[Fred A. Miller]

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Microsoft 2Q Income Drops 13%

Microsoft's net income fell 13% during the second quarter ended 
Dec. 31, and earnings the second half of the year will fall 
short of analysts' predictions, as PC sales continue to slump. 
The results and outlook show how dependent Microsoft remains on 
PC software--which contributed nearly 65% of sales during the 
quarter--as the company reinvents itself around distributed 
Internet applications.
 
Net income declined to $2.28 billion in the second quarter, 
compared with $2.62 billion a year ago. Earnings per share of 
41 cents missed analysts' consensus estimate of 43 cents per 
share. Excluding a charge of $660 million to settle class-
action lawsuits against the company, earnings would have been 
49 cents per share, Microsoft said. Net revenue increased 18% 
to $7.74 billion, as the company benefited from 17 million 
copies of Windows XP sold at retail and preinstalled on new 
PCs, and from 1.5 million units of its new Xbox video game 
system. 

But PC sales remain Microsoft's bread and butter. Desktop apps 
contributed $2.45 billion in revenue during the quarter, a 1.6% 
drop from a year ago. Desktop versions of Windows accounted for 
$2.55 billion in sales, up 24%. But PC shipments dropped about 
5% during the second quarter, a little worse than the company 
expected. More customers moved to annuity licenses during the 
quarter, causing Microsoft to defer some revenue. And the 
overall PC market remains unhealthy, on track for a percentage 
decline in the mid-single digits this fiscal year, CFO John 
Connors said during a conference call Thursday. "The global PC 
market continued to deteriorate in the December quarter," 
Connors said. "We do not think we are in a recovery leading to 
growth in the near future. The second half of 2002 will 
continue to be weak." 

Looking ahead, Microsoft expects to earn 50 cents or 51 cents 
per share during the third quarter ending March 31, on sales of 
$7.3 billion to $7.4 billion. Analysts were expecting lower 
earnings, but higher sales. For fiscal 2002, which ends in 
June, Microsoft expects to earn $1.57 to $1.60 per share, on 
revenue of $28.8 billion to $29.1 billion. Analysts expected 
earnings of $1.83 a share on revenue of $28.6 billion. Says 
Connors, "The PC business is great for Microsoft in the long 
term, but it does not appear that the current challenges have 
passed." - Aaron Ricadela

Related stories:
Microsoft May Give Schools More Cash To Settle Suit
http://update.informationweek.com/cgi-bin4/flo?y=eFgA0Bce7K0V20BVeW0Av

Gates' Vision For The Post-PC Home
http://update.informationweek.com/cgi-bin4/flo?y=eFgA0Bce7K0V20BFEQ0A2

- -- 
Fred A. Miller
Systems Administrator
Cornell Univ. Press Services
fm@cupserv.org

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