Microsoft beats expectations in killer quarter

Almost lost in all the trial hoopla was Microsoft's announcement today of its first quarter earnings. The software giant creamed expectations, earning $1.68 billion or $.62 cents a share, compared with $663 million or $.25 a share the same quarter a year earlier (these figures include a $160 million gain from the sale of SoftImage and a $100 million charge from its purchase of WebTV last year). The company had revenues of almost $4 billion (up from $3.1 billion a year earlier).

Microsoft says that the strong gain is tied directly to consumer acceptance of Windows 98. The company has sold over 10 million Windows 98 upgrades since the product was released in late June, which is a far more than was expected. Support calls for Windows 98 are 50% less frequent than they were for Windows 95.

"Demand was stronger than anticipated due to the successful launch of Microsoft Windows 98 in Japan and several European countries," said Greg Maffei, Microsoft's CFO. "While revenue growth has slowed in Office 97, the product continued to post strong results and customer adoption of Windows NT Workstation is at an all-time high."

Other interesting tidbits from the announcement: Microsoft expects the third beta of Windows NT 5.0 to be released in early 1999, not late 1998 as previously expected. The final product is expected six to nine months after that. Microsoft's HotMail Web-based email service now has 23 million active accounts and adds 125,000 new accounts every day.

"It's a sunny day in Seattle and we don't get a lot of those," said Maffei.

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