News updateicrosoft Earnings Seen As Strong
REUTERS - 1/16/00 5:45:00 PM
By Dick Satran
SAN FRANCISCO (Reuters) - Despite its dramatic reshuffling at the top and signs that the ``post-PC
era'' has Microsoft Corp. [MSFT] in a quandry, look for the software giant to report strong earnings
on Tuesday.
The reason: The Wintel world is still alive and kicking up strong earnings, fueled by the growth of the
Internet that eventually is supposed to make Microsoft's packaged software obsolete.
Not yet though. Results next week will show strong double-digit earnings growth, with most analysts
expecting a 16 to 17 percent gain. The consensus earnings per share forecast is 42 cents a share, up
from 36 cents a year ago.
Those results, too, come ahead of the anticipated February release of the Windows 2000 operating
system that will update Windows NT to make it a stronger player in the booming Internet server
market. The new system will sustain, and perhaps accelerate, the growth rate through the year,
analysts said.
The company is also early in the upgrade cycle for the Office 2000 applications suite and an expected
new version of its widely used consumer-oriented operating system, code-named Microsoft
Millennium.
Salomon Smith Barney analyst Neil Herman said in a report Friday that he sees ``two to three years of
strong revenue streams in the place from each of these product cycles.''
Strong results would help dispel any fears lingering after Gates handed the chief executive post to No.
2 Steve Ballmer, and talked about the need to reinvent Microsoft to meet growing competition from
competitors like International Business Machines Corp. [IBM] and Sun Microsystems Inc. [SUNW]
Anticipation rose for a strong quarter Thursday when, at the very instant Bill Gates was stepping
down as Microsoft's chief, Intel Corp. [INTC] was reporting better-than-expected, record earnings in
results that confirmed robust demand for PCs and an outlook for more of the same.
While Intel and Microsoft, the so-called Wintel of the computer industry, are no longer as deeply
intertwined as they once were, they still are twinned as the microprocessor and operating system in
millions of computers sold each year around the world.
``Revenue could beat our $6.1 billion forecast, driven primarily by solid PC demand and Office
sales,'' said analyst Michael Kwatinetz of Credit Suisse First Boston.
The continuing steady growth of the PC shows that Gates may have plenty of time to recast the
company before the curtain goes down on the PC era. ``He's going out while the company is still at the
top,'' said analysts Rob Enderle of Giga Information Group, ``The company is still in good shape.''
The future, though, is more of a puzzle, with big trends pointing to a reduced role for Microsoft as
Internet-based computing grow. ``The next few years will be about identifying and addressing new
services and features taking advantage of the Internet,'' said Herman. The results on Tuesday are likely
to show that he'll have plenty of time to explore those alternatives.