Microsoft posts Q1 earnings of 46 cents per share

Citing accelerated deployments of Windows 2000 Professional and Windows Millennium Edition (ME), Microsoft Corp. announced net income of US$2.58 billion for the quarter ended Sept. 30, an 18 percent increase over the $2.19 billion reported last year.

Diluted earnings per share for the company’s first quarter of fiscal year 2001 were 46 cents, excluding a one-time charge for an accounting change. Including the one-time accounting charge, Microsoft reported earnings per share of 40 cents for the quarter, the company said.

Revenue during the quarter was up 8 percent over the same quarter last year, totalling $5.8 billion, and equal to the revenue figure reported in the fourth quarter of fiscal 2000, Microsoft said.

In a conference call, John Connors, chief financial officer of Microsoft, said the results were solid across all businesses, led by the faster deployments of Windows 2000 Professional in the business sector and Windows ME in the consumer arena. Windows 2000 Professional shipped in February as a replacement to Windows NT Workstation, while Windows ME shipped in September as an upgrade to Windows 98.

Deployments of Windows 2000 Professional and Windows ME were especially strong in Asia and the U.S., but were poor in Europe, where business PC sales were weak, Scott Boggs, corporate controller of Microsoft, said in the conference call.

Licenses of Windows 2000 Professional now represent 30 percent of all operating systems shipped by Microsoft, according to Boggs. Recent customer wins included NASA, which is rolling out 17,000 seats across its organization; Siemens AG, which will deploy up to 200,000 desktops next year; and Motorola Inc., which did a divisional rollout of 30,000 seats. Motorola is also deploying Windows 2000 Server, Boggs added.

Revenue from the channel was “about what we expected,” Boggs said, noting that business PC sale growth was below what it was in the quarter a year ago, and sales of consumer PCs have slowed to single digit growth. Also, Microsoft continues to feel the impact of the large equipment manufacturers seeking greater market share by cutting prices, resulting in lower licenseing to Microsoft, Boggs said.

Sales of Office 2000 declined slightly from a tough comparable quarter in the prior year, Boggs said. The 1999 quarter included the recognition of $150 milllion worth of in technology guarantee coupons related to the launch of Office 2000.

“Absent the impact of these coupons Office revenue grew over 5 percent,” Boggs said.

Boggs also highlighted initial sales of SQL Server 2000, released in August, saying they were very good, and said a combination of Windows 2000, Advanced Server and SQL Server 2000 is able to deliver 505,000 transactions per minute on a 20-node Compaq Corp. ProLiant 8500 cluster.

In consumer software, Boggs said MSN access and advertising revenue was up over 50 percent on contunued strong growth. During the quarter, MSN access added 500,000 new subscribers to bring the total to 3.5 million. Media Metrix Inc. said the average monthly minutes spent on MSN is 116, up 80 percent from last year.

“We are very excited about this progress, especially as we head into the seasonally strong holiday season,” Boggs said, adding that on Oct. 25, MSN will launch new products, including new search, shopping, communities and browser capabilities that he said would give Americal Online Inc. a run for its money.

Boggs also provided details about what he said was a groundswell of support around Windows 2000 and Enterprise Server.

Among the new customers are Lycos Inc., FreeMarkets Inc., RadioShack Corp., The Home Shopping Network and General Motors Acceptance Corp. Lycos is planning to deploy 1,000 Intel Corp.-based servers running Windows 2000 Server to support its Web site, the fourth most visited on the Internet, Boggs said.

“A common theme to these wins is the growing belief by customers that a powerful, integrated software solution is the key to business agility and success in the new economy,” he said.

Filling out some of the details of the sales, Boggs said FreeMarkets, a global financial transactions clearing house, selected Window 2000 Data Center Server and Enterprise Server to replace a combination of Oracle Corp. and Sun Microsystems Inc. products — both Microsoft rivals. Radio Shack switched to Windows 2000 and SQL Server from a combination of Oracle and UNIX products and is using XML and Enterprise Servers to integrate the company’s Web site and legacy back-end systems.

The Home Shopping Network switched from Sun and Oracle to Windows 2000 and SQL Server and was live in under two months, Boggs said. GMAC chose the Microsoft platform over Sun and other RISC vendors because Microsoft could get them to market in 90 days, Boggs said.