Microsoft Corp reported outstanding second-quarter results that shattered Wall Street expectations. However, the company tempered the news with typical doubts about the quarters ahead. The software giant posted net income that soared 75% year-over-year to $1.98bn, on revenue up 37.7% at $4.94bn. Earnings per share amounted to $0.73, blowing away analyst estimates of $0.59 and beating any whisper numbers out there. Redmond rode the wave of seasonal high PC sales which boosted its OEM revenue 48% to $1.8bn and saw strong results across all product lines, with $2.32bn in revenue from its platforms group, $2.15bn from applications and tools and $467m from its interactive media group and other segments. Demand was also strong for Windows NT Server and NT Workstation, server applications, and Office 97, the company said, but the results can also be largely attributed to surge in corporate spending before pre-Y2K lockdowns, according to chief executive Greg Maffei. He explained that normal year-end spending was unusually high this year due to upcoming Y2K constrictions, exulting (and paying homage to Mark Twain) that rumors of the demise of the PC have been greatly exaggerated. The Exchange Server product also saw a solid quarter, as the company shipped 4.5 million seats during the period, and taking its total to 14.4 million in calendar 1998. Six-month net income jumped 104.1% to $3.67bn on revenues up 32.4% at $8.89bn, while earnings per share for the period rose 101.5% to $1.35. Results for the corresponding year-ago period include a pre-tax acquisition charge of $296m. Looking ahead, Maffei predicts a tough third quarter – by Microsoft standards at least – where revenues could be down as much as $300m sequentially due to seasonal slowdowns, slower PC growth, lingering economic concerns in many regions of the globe and the aforementioned Y2K spending freezes. Earnings for the third quarter are still expected to be up about 25% year-over-year, and Maffei cautioned that First Call estimates of $0.60 are two to three pennies light, while the fourth-quarter consensus of $0.61 was also described as $0.01 to $0.02 too low. Even as he said that, though, Maffei said he would caution anyone from looking for any substantial upside from that guidance.
