Microsoft Survives Justice Department Trial In Quarterly Earnings

Though the U.S. Department of Justice had only a lump of coal for Microsoft at Christmas, Santa still brought the company a huge present. Microsoft yesterday announced record revenue and income in its second fiscal quarter, which ended Dec. 31. The software developer recorded revenue of $4.94 billion, up from $3.59 billion in the year-ago quarter, and income of $1.98 billion, nearly double the $1.13 billion for the same period last year.

Earnings rose 74% to 73 cents per diluted share, a dramatic rise from the 42 cents per share reported this time last year. Revenue increased by almost a billion dollars from the company's first fiscal quarter, which ended Sept. 30.

The company credited strong growth in PC sales in the so-called Christmas quarter for propelling sales of products such as Windows NT Server 4.0 and NT Workstation 4.0. For example, Microsoft sold more than 3 million new copies of NT Workstation during the quarter, bringing the total installed base to around 25 million.

Additionally, the Exchange Server messaging engine did well, with 4.5 million new clients sold during the quarter.

Still, Microsoft CFO Greg Maffei cautioned that tough times may well lie ahead. Given the looming year 2000 problem, IT departments may lock down budgets for new purchases, which may particularly affect sales of Office 2000, due out in April, as well as Windows 2000, due to ship sometime during the second half of this year.

If the company's growth continues strong, Microsoft may be able to break $20 billion in revenue by the end of its fiscal year, on June 30. But Maffei instead predicts revenue may be off this quarter by about $300 million over the Christmas quarter.