Microsoft sales continue to improve, but growth slows

Microsoft Corporation on Tuesday announced record revenue and income for the fiscal year ending June 30 along with its quarterly financial report, which beat analysts' estimates while not substantially improving when compared to the same quarter a year before. The company reported annual revenues of $19.75 billion and a net income of $9.42 billion last year, a 16 percent increase over the previous year. But the last quarter wasn't particularly stellar: Microsoft reported that it earned $2.41 billion on $5.8 billion in revenues, compared to $2.2 billion and $5.76 billion, respectively, last year. The company blames a general slowdown in productivity software sales, while stating that year over year revenues for Windows products are up substantially.

"We experienced another record year of business results despite many challenges," said Microsoft CFO John Connors. "In particular, the Asia region rebounded nicely and our consumer business experienced a significant increase in revenue. Although we remain guarded in the near term about business PC growth rates, we look forward to the tremendous opportunity in front of us with the Windows 2000 generation of server products, including Windows 2000 and the soon-to-be-available SQL Server 2000 and Exchange Server 2000."

Despite rumors that Windows 2000 isn't selling as well as expected, the company maintains that "customer enthusiasm" for the product is high. Microsoft reported that sales of Windows 2000 Advanced Server for the quarter were double that of Windows NT Server 4.0 Enterprise Edition in the same quarter last year, for example. Large corporations such as Royal Dutch/Shell, Xerox, and Motorola have committed to rolling out Windows 2000 company-wide, while PC makers such as Dell, Compaq, and IBM have endorsed the product by deploying it internally across their organizations. And the U.S. Navy announced that its next generation aircraft carriers, the CVN-77, will use Windows 2000 for its mission-critical Integrated Warfare System. Connors says that the release of Windows 2000 Service Pack 1 (SP1), due this week, will spur more Windows 2000 adoptions as well.

Despite strong revenues from Windows, which rose 5.7 percent year-over-year, to $2.37 billion from $2.25 billion, other Microsoft products didn't fare as well. Productivity applications and developer tools fell 9.9 percent last year, to $2.64 billion from $2.93 billion. Revenues from consumer products increased from $593 million to $796 million, while sales to PC makers increased 5.6 percent to $1.73 billion. "We are satisfied with the current quarter's financial performance," the usually dour Connors summarized

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