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July 18, 1997updated 05 Sep 2016 12:35pm

MICROSOFT SHOWS STAGGERING GROWTH BUT WARNS IT WON’T LAST

By CBR Staff Writer

Microsoft Corp hit the analysts’ estimate right on the head yesterday with fourth-quarter and yearly results usually only posted by state-run monopolies. Whispers were out all week that the company would be turning in nearly $0.80 a share and 80% growth in net earnings. And $0.80 a share was what the company came up with, which made for an 89% growth in fourth-quarter profits year on year. That was the company’s highest percentage growth in nine years. It translates into profits of $1.06bn on revenue that soared 40.8% to $3.18bn. Fourth-quarter revenue rose 41% to $3.18bn. But even the best have blips. Microsoft said it won’t continue and that it expects revenue growth to slow during the fiscal year just started. The whispers caused the share price to head skywards; it closed Wednesday up $9.99 to $148.4375. Yesterday it grew a more modest $1 to $149.4375, so a fair amount of profit taking can be expected today probably, especially as the stock slipped in after-hours trading, down about three points at $146. Microsoft’s market capitalization based on yesterday’s close is a staggering $198.3bn, more than double IBM Corp’s, which was $99.0bn. The main reason for Microsoft’s hyper-growth this year has been the introduction of Office97 and the continued march of Windows 95 across the desktops of the world’s personal computers. It also cited Windows NT and other server software shipments doubling compared to fiscal 1996, plus a lower cost structure, largely because of the switch to more CD-ROMS over floppy disks. This was also a big year on the acquisitions front. Net profits for the year to June 30 were up 57% to $3.45bn or $2.63, on revenues that rose 31% to $11.36bn. Microsoft pushed further towards becoming perceived as a general media company with the acquisition of WebTV Networks Inc and its $1bn investment in Comcast Corp, the cable and telecommunications company. Chief financial officer Mike Brown said he expected the WebTV acquisition to finally close next quarter, resulting in a charge of $322.5m, or $0.25 per share. It would also impact earnings per share by about two cents for the time being. The company also slugged it out in the hearts and minds of developers, with Microsoft first acknowledging the importance of Java and then proceeding to try and make it its own by producing extensions optimized for its Windows platforms. Redmond also increased its role in electronic commerce with a joint venture company formed with First Data Corp called MSFDC that is due to introduce a service early in 1998 to enable companies to send bills to, and receive payments from, consumers over the internet. The company re-purchased around 37 million shares during the fiscal year for $3.1bn. Such a large-scale share buyback scheme is essential for the company to go on creating its infamous millionaire employees. But it didn’t buy any shares in the fourth quarter because it thought the price was too high, according to Brown. Cash at the end of the year was $8.97bn, down slightly from the previous quarter becuase of the investments. Microsoft’s long-time CFO Mike Brown was doing his final analysis before handing the reins over to Greg Maffei. Brown has a reputation of being ultra-conservative in his analyses and even, dare we say, downbeat in general. But yesterday he was in full flow, throwing jibes lightheartedly back at his critics. He advised everybody to stick with Bill, whom he described as the entrepreneur in the history of commerce. Brown is off to spend more time with his family and with the Nasdaq stock exchange, where he is to become chairman – a good vantage point from which to track his substantial Microsoft stock holding.

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