Microsoft sales boom but slowdown forecast

23 April 2004 Microsoft’s revenues increased by 17% in the first three months of 2004 but it made a gloomy forecast for next year, according to the software giant’s latest quarterly results.


A rash of legal settlements, first with a fine from the European Commission, a hefty payout to Sun Microsystems and a settlement with digital rights management specialist InterTrust, made a $2.5 billion dent in Microsoft’s net income, which fell 39% to $1.32 billion.

But sales nevertheless surged ahead on the back of strongly rising PC sales. Revenues hit $9.18 billion for the period to the end of March, up from $7.84 billion in the same quarter last year and well ahead of Wall Street’s well-managed expectations of $8.67 billion.

Even taking into account the gain of 4.5% as a result of the sharp decline in value of the dollar, Microsoft’s revenue growth still remains stronger than most other technology companies.

This was helped along by strong growth in its core client, information worker and server businesses, which grew by 16%, 18% and 19% respectively. Consumer products such as its Xbox gaming system and online service MSN also did better than expected.

This leaves Microsoft with a massive war-chest of $56.4 billion in cash and short-term investments.

Microsoft upped its forecasts for the rest of the fiscal year, which ends on 30 June 2004, to between $36.4 billion and $36.5 billion, an increase of 13%-14% over fiscal 2003. The introduction of chief financial officers to each individual business unit is credited with helping to keep costs down and boost operating profits.

But Microsoft pitched sales and profit growth for next year at just 4%, some way below analysts’ expectations. This, it said, was due to an expected slowdown in PC and server sales and the end of its much-criticised “upgrade advantage” licensing programme. A challenge from open source operating system Linux was not mentioned and has failed to make as much of an impact this year as many had expected.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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