Disappointing Revenues For Microsoft; Company 'Guarded' About Near-Term Performance

Light demand for business PCs led to lower-than-forecast revenues at Microsoft during its third quarter, ended March 31, sending shares of the company down in after-hours trading.

Microsoft reported today that sales rose 23%, to $5.66 billion, compared with $4.6 billion in last year's third quarter. Net income also increased 23%, to $2.39 billion, compared with $1.9 billion a year ago. But many analysts had predicted revenue of $5.9 billion, despite the expectation of soft corporate sales. "This is a transitional quarter for Microsoft," Lehman Brothers analyst Michael Stanek wrote in a research note. "As other companies have reported [earnings], the same theme emerges over and over again: slower-but-rebounding growth in IT and PC purchases due to this post-Y2K swoon."

Shares of Microsoft finished today up 25 cents, to $78.94, but fell to about $76 in after-hours trading.

Microsoft says original equipment manufacturer revenue was light as demand for business PCs remained slow. The company issued a statement saying it remained "guarded about near-term growth." During a conference call with analysts, Microsoft execs said they believe PC sales, as a percentage, grew in the single digits during the quarter. However, demand began to pick up during the last two weeks of March, according to the company.