MSFT Beats the Street in Q3 '01
- By Scott Bekker
beat Wall Street earnings estimates in the March quarter, and the company credits Windows 2000 Professional and the .NET enterprise servers for helping it glide through tumultuous financial times.
After the markets closed Thursday, Microsoft reported earnings per share of 44 cents for the fiscal third quarter ended March 31. The consensus of analysts polled by First Call predicted earnings of 42 cents a share.
The earnings came on revenues of $6.44 billion. Several analysts were calling for revenues closer to $6 billion.
"Our revenue streams have not been dependent on dot-coms and the telecommunications sector," CFO John Connors offered by partial way of explanation for Microsoft's getting through the quarter unscathed.
Revenues may be flat in the next quarter, and Microsoft also downgraded its guidance on the 2001 PC market.
"[We] previously thought only 10 percent growth for '01," Connors said of Microsoft's worldwide PC growth predictions. "We now think the worldwide growth rates are probably somewhere in the 7 percent to 8 percent range."
The Windows 2000 Server family and the .NET Enterprise Server family get lumped into the single category of Enterprise Software and Services in Microsoft's financial statements.
Revenue on those products jumped 22 percent over the year-ago quarter to $1.254 billion. "Server revenues are growing nicely against a tough comparable quarter," said Corporate Controller Scott Boggs during the analyst call. The "tough" part referred to Microsoft's launch of Windows 2000 Server and Advanced Server in the comparison quarter a year ago. Sales spiked in the first 30 days after the Feb. 17 launch before falling to more normal levels.
SQL Server revenues were up 40 percent on the quarter, company officials said. Connors and others took several potshots at database competitor Oracle Corp. "We're winning a lot more business today that would have probably gone to the Sun-Oracle platform a year or two ago," Connors said.
But when asked for specifics of SQL Server 2000 sales, Connors acknowledged that: "The largest percentage [of SQL Server business] is upgrades of the existing customer base."
Company officials did not choose to highlight details of Windows 2000 Server, Advanced Server or Datacenter Server revenues during the call.
Late last month at WinHEC, Microsoft CEO Steve Ballmer disclosed a strategy Microsoft is considering with the Whistler line of servers of nudging users toward Whistler Advanced Server as the baseline business server instead of standard server.
Connors hinted at the financial incentive for Redmond to move the customer base to Advanced Server during Thursday's call. "For us to grow the Windows 2000 Server platform line, we'll have to grow the percentage that is Advanced Server more so than Datacenter Server."
For the fourth quarter, Connors expects the combined Enterprise Software and Services revenues to be down sequentially from the third quarter, but above Q4 2000 by double digits.
Microsoft was much more forthcoming about Windows 2000 Professional during the call.
Revenue for the new desktop operating system grew in excess of 40 percent, company officials said. Windows 2000 Professional also accounted for a larger percentage of 32-bit desktop operating system shipments, up to 35 percent from 31 percent in the December 2000 quarter.
Connors predicted Windows 2000 Pro's percentage may climb by a point or two in Q4 but not by the same 4 percent. –
Scott Bekker is editor in chief of Redmond Channel Partner magazine.