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Coupons to clip MSFT revs
March 11, 1999: 6:03 p.m. ET

Software giant to post $400M in unearned 3Q revenue for Office 2000
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NEW YORK (CNNfn) - Microsoft Corp. said Thursday it is on track to meet third-quarter earnings expectations, despite an expected decline in revenue due to coupons issued to customers in advance of the release of the Office 2000 suite of software products.
     Analysts polled by First Call expect Microsoft (MSFT), which has consistently outperformed Wall Street expectations, to report a profit of 65 cents a share when it announces fiscal third-quarter earnings in April.
     Citing a strong demand for PCs, Greg Maffei, Microsoft chief financial officer, said in a conference call that the company remains on track to meet earnings estimates. He added Microsoft still expects the seasonal slowdown it had anticipated when it announced second-quarter earnings in January.
     "We see the usual seasonal trend with our business. Nothing more and nothing less," Maffei said.
     Revenue, however, will be skewed a bit for the following two quarters.
     The company will include a coupon for a free upgrade to Office 2000 for customers who purchase Office 97 in the third quarter. Under federal accounting regulations, the company cannot recognize the revenues for Office 2000 until it ships the upgrade to customers who redeem the coupons.
     Office 2000 is due to ship in the fourth quarter.
     Maffei said the company expects to report $400 million in unearned revenue for the third quarter, which ends March 30. Maffei said the "vast majority" of that revenue will be recognized in the fourth quarter.
     Analysts expected Microsoft to log third-quarter revenues of $4.6 billion. Maffei advised analysts to adjust their revenue outlooks to $4.2 billion in the quarter and to add $400 million to their fourth-quarter revenue estimates.
     Microsoft had been expected to ship Office 2000 by the end of March. But Maffei said the suite will be not available to customers until the fourth quarter.
     "We're on track for release to manufacturer this quarter, which is what we've said all along," Maffei said. "We're far more concerned with making a quality product than with shipping early."
     Microsoft shares rose 1/16 to close at 161-7/16, then inched up to 161-1/2 in after-hours trade.Back to top


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