Thursday, April 23, 1998

Microsoft reports 28 percent increase in quarterly profit

By GEORGE TIBBITS / AP Business Writer

SEATTLE (AP) -- Microsoft Corp. on Wednesday reported a 28 percent increase in quarterly profit, beating Wall Street expectations, as revenue grew 18 percent amid strong sales of its business software.

However, the world's largest maker of personal computer software warned that revenue growth was its lowest in two years and was likely to slow further the rest of the year, dragged down in part by the Asian economic slump.

Microsoft said it earned $1.34 billion, or 50 cents on a diluted basis, in its fiscal third quarter ended March 31. That was up from a profit of $1.04 billion, or 40 cents per share, in the year-ago quarter.

Revenue rose to $3.77 billion from $3.21 billion.

The results come amid close government scrutiny of Microsoft, which has been accused by the Justice Department of abusing its monopoly in software for running computers to control other software markets.

Microsoft's profit beat expectations of analysts surveyed by First Call, who were expecting 48 cents-a-share profit. The results were released after the close of financial markets. Microsoft stock rose 4 percent, or $3.75 a share to $98.75, Wednesday on the Nasdaq Stock Market.

Microsoft cited strong sales of its Office software and growing demand for its Windows NT, Microsoft's operating system for networks of computers, and its BackOffice suite of applications.

Microsoft chief financial officer Greg Maffei said Microsoft was pleased that consumer demand remained high for its products.

"But it is critical to note that our growth has slowed for each of the last four quarters, and we are likely to experience slower growth for the balance of calendar 1998," he said.

Microsoft said a month ago that it would report better-than-expected quarterly profits despite Asia's economic woes and financial shortfalls at other major high-tech companies.

While the Asian market for Microsoft's software remains weak, there are signs it may have bottomed, Microsoft executive vice president Steve Ballmer said in a statement.

For the first nine months of its fiscal year, Microsoft earned $3.13 billion, or $1.17 a share on a diluted basis, on revenue of $10.49 billion. That was up from a profit of $2.40 billion, or 92 cents a share on a diluted basis, on revenue of $8.18 billion in the year-ago period.