October 21, 1996 6:00 PM PDT

Microsoft earnings up 22%

Microsoft (MSFT) today reported a 22 percent rise in earnings for the first quarter, an increase that the company attributed in part to strong sales of Windows NT 4.0.

Microsoft reported net profits of $614 million, or 95 cents a share, for the quarter ending September 30, compared with earnings of $499 million, or 78 cents, for the same quarter a year ago. Revenue climbed 14 percent to $2.3 billion, up from $2.2 billion last year.

The software giant's performance beat analysts' estimates of 90 cents a share, according to First Call, which compiles earnings rankings from 24 analysts.

Microsoft's stock, which announced its results after the market's close, finished the day at 134 points even. In after-hours trading, it rose 2-3/8 to 136-3/8 per share.

Despite the strong performance, Microsoft posted the lowest quarter-to-quarter revenue gain in its history, said Greg Maffei, vice president of corporate development and treasurer, in a press conference. He said strong sales from Windows 95 last year made revenue figures harder to beat this year.

And in breaking out sales growth, he said applications and content in the products group division rose 13 percent to $1.11 billion in the quarter, compared with last year's levels. That growth was fueled by increased sales of desktop applications, especially 32-bit versions of Office and Office Pro.

Maffei added that Office Pro sales outpaced Office revenues for the fourth consecutive quarter.

Microsoft's platform group saw revenues rise 15 percent to $1.19 billion in the quarter over a year ago, driven largely by the growth in the 32-bit Windows operating systems. And although the group's retail sales decreased in the quarter over a year ago, he said, Windows 95 quarterly sales and shipments set a new record because of increased sales to original equipment manufacturers.

A handful of analysts had anticipated different results today and in the last two weeks had downgraded their recommendations on Microsoft's stock, including Soundview Financial Group's analyst, Russell Crabs, who cut his short-term rating Friday to "hold" from "buy" for this quarter. Crabs is maintaining his long-term buy recommendation for the fiscal year 1997, though, with an earnings estimate of $4.02 per share.

First Call's year-end consensus is $4.07 a share, with the range spanning from $3.80 to $4.25 per share.

 

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