Microsoft Corp has once again edged out Wall Street expectations, posting net income that surged 52.9% to $1.13bn on revenue up 34% at $3.59bn. Earnings per share rose 49% to $0.85, beating the First Call consensus by $0.03. The solid performance came despite a poor showing in the Far East and Southeast Asia, where revenue declined 8% sequentially. The countries in question provide about 13% of Microsoft’s overall revenue. Strong sales in North America and Europe, where sales grew 33% year-over-year, helped offset the Asian slump and the fact that the company lost about $140m in revenue due to currency exchange on a year-to-year basis. Growth in PC unit shipments fueled by the boom in sub-$1,000 machines also contributed to the quarter, leading overall OEM revenue to 40% growth. Platform revenue grew 26% while desktop applications sales rose about 43%. On the Windows 98 front, the company is still saying it has no plans to change its release schedule, implying it does not expect to have to make any material changes as a result of its ongoing battle with the Department of Justice. Six-month net rose 32.5% to $1.8bn on revenue up 35% at $6.72bn, while earnings per share rose 29.8% to $1.35. Looking ahead, CFO Greg Maffei is taking his usual cautious approach – which usually allows Redmond to both keep expectations reasonable and routinely beat them by a few cents. Maffei warns that the Asian countries which have hit hard times will miss revenue targets to the tune of $300m over the next two quarters. That decline is expected to negatively impact the bottom line by $0.15 over the six months, leading to little upside potential. Next quarter should see revenue slightly up sequentially with earnings also a few pennies better than this quarter’s $0.85. The fourth quarter should see revenue slip back a bit and earnings retreat to that $0.85 level. Next year, Maffei says Redmond could see several quarters of somewhat stagnant revenue and earnings streams.
