Strong Windows demand helps Microsoft deliver good Q2

By Clare Haney, IDG News Service |  Operating Systems

MICROSOFT OFFICIALS SAID Thursday that strong demand for its Windows 2000 operating system and for its .NET Enterprise Servers helped the company report good second-quarter results for fiscal 2001.

Officials at the Redmond, Wash.-based software giant said, however, that given the current economic uncertainty, it remains cautious about predictions for the rest of fiscal 2001.

"We are comfortable with our forecasts and where we are," said CFO John Connors. "However, if there is further economic slowing, it would impact us."

For the quarter ending Dec. 31, Microsoft reported net income of $2.62 billion and diluted earnings per share of $0.47 on revenue of $6.59 billion. Revenue was up 8 percent on the same quarter from last year, according to Connors.

Twenty-two brokers polled by First Call/Thomson Financial estimated that Microsoft would report second-quarter earnings per share of $0.47, while 14 brokers predicted the software giant would record second-quarter revenue of $6.51 billion.

Microsoft said that sales of Windows 2000 Professional were particularly strong in the second quarter, whereas a "wide range of customers" is already using pieces of the company's .NET architecture to build Internet applications.

Looking ahead, Connors said Microsoft expects revenue for its third quarter, due to end March 31, 2001, to be in the range of $6.3 billion to $6.4 billion, while diluted earnings per share are likely to be 42 cents or 43 cents.

Twenty-one brokers polled by First Call are predicting Microsoft's earnings per share will be 44 cents, while five brokers estimate third-quarter revenue will be $6.38 billion.

For fiscal 2001 as a whole, Microsoft predicts revenue between $25.2 billion and $25.4 billion with diluted earnings per share in the range of $1.80 to $1.82. But again, Connors said, "we remain guarded about the near-term economic impact."

In December, Microsoft issued a rare profit warning concerning its second quarter. Later that month, Microsoft announced plans to buy midrange ERP (enterprise resource planing) software vendor Great Plains Software for $1.1 billion. For years, Microsoft had denied any interest in the ERP market whose two front-runners for higher end software are SAP and Microsoft's bitter rival Oracle.

Connors said the Microsoft sales force "picked it up" in the last three weeks of December, spurred by the profit warning.

Connors said Microsoft expects to close the Great Plains acquisition by the end of its fiscal year. The company hopes the purchased software will complement its bCentral small-business portal

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