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Microsoft tops estimates
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October 18, 2001: 6:14 p.m. ET
Software maker beats Street by 4 cents per share as sales rise 5 percent.
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NEW YORK (CNNmoney) - Microsoft on Thursday reported a fiscal first-quarter profit that beat the Street's estimates on sales that rose modestly from the same quarter a year earlier.
But executives of the world's largest software maker lowered their growth forecast for the current quarter and the remainder of the fiscal year, citing weakening economic conditions and slack demand for personal computers.
After the close of trading, Microsoft (MSFT: Research, Estimates) said it earned 43 cents per share during the quarter ended Sept. 30. That excludes special charges and compares with a profit of 46 cents per share during the same quarter last year. Analysts generally had expected the company to report an operating profit of 39 cents per share, according to a survey conducted by First Call.
Accounting for $1.28 billion in investment losses, Microsoft's net income for the quarter was 23 cents per share.
At $6.1 billion, Microsoft's fiscal first-quarter revenue rose 5.1 percent from $5.8 billion during the year-ago quarter. By First Call's count, Wall Street generally had expected revenue nearer $6.2 billion, with some estimates ranging as high as $6.5 billion.
Microsoft is the world's largest supplier of computer software and is the dominant supplier of PC operating systems with its various versions of Windows.
Before the company released its earnings report, some analysts said they were confident the company would meet the Street's earnings expectations, even when many other PC-related companies - including Compaq and Gateway - warned of shortfalls in the wake of the Sept. 11 terrorist attacks on the United States.
Because they occurred near the end of the quarter, executives of Compaq and Gateway said the attacks had prevented them from closing much of the business they had expected to record on the September quarter's income statement, and therefore caused them to miss the Street's consensus estimates.
SG Cowen analysts Drew Brousseau on Thursday said he expected the impact on Microsoft to be limited since its quarters tend to be less back-end loaded.
Still, Brousseau and some other analysts had expected Microsoft executives to provide a less optimistic forecast for the December quarter, as a weakening economy and declining consumer confidence continue to weigh on demand for PCs.
And they did so Thursday evening.
When Microsoft reported its previous quarterly results, executives said for all of fiscal 2002 they expected sales to range between $28.8 billion and $29.5 billion and earnings to come in between $1.91 and $1.95 per share.
They made those forecasts under the assumption that the economy would not deteriorate any further and that PC units sales growth would be in the "mid-single digits." Since that time, many economists have become less optimistic, and PC industry observers have been reining in their expectations for PC sales growth in 2002.
"We now believe PC shipments will not show any growth from the prior year and will show a decline for the full fiscal year 2002," John Connors, Microsoft's chief financial officer, told analysts during a teleconference Thursday evening.
For all of fiscal 2002, Connors said Microsoft now expects total sales to range between $28.4 billion and $29.1 billion, while profits for the year will come in between $1.61 and $1.66 per share.
In the current quarter, he said the company is aiming for sales between $7.1 billion and $7.3 billion, and profit between 49 cents and 50 cents per share. By First Call's count, analysts generally had been expecting the company to report revenue of $7.3 billion and a profit of 51 cents per share in the current quarter, according to First Call. 
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