Microsoft beats street, but legal charges bite

Microsoft beats street, but legal charges bite

Citing solid performance across its businesses, Microsoft on Thursday reported earnings and revenue that beat analysts' forecasts, but its settlement with Sun Microsystems and a fine by the European Union did take a bite out of the software giant's earnings.

Microsoft reported net income of US$1.32 billion, or US$0.12 per share, on revenue of US$9.18 billion for the third quarter of its 2004 fiscal year, ended March 31. That compares to net income of US$2.14 billion, or US$0.20 per share, on revenue of US$7.84 billion in the year-earlier period, the company said in a statement.

This year's net income includes an after-tax charge of US$1.89 billion, or US$0.17 per share, related to Microsoft's settlement with Sun and the European Commission fine. It also includes an after-tax charge of US$501 million, or US$0.05 per share, for stock-based compensation expenses, Microsoft said.

Without the charges, Microsoft's earnings amounted to US$0.34 per share, ahead of the US$0.29 per share consensus estimate among analysts polled by Thomson First Call. Microsoft also exceeded its own January forecast of earnings per share between US$0.23 and US$0.24, including stock-based compensation expenses of about US$0.05.

All of Microsoft's business segments met or exceeded the company's expectations, Microsoft Chief Financial Office John Connors said in the statement. Overall corporate IT spending continues to improve and Microsoft expects healthy demand through the end of its fiscal year on June 30, he said.

As a result of its better-than-expected performance, Microsoft upped its forecast for its full 2004 fiscal year. The company now expects revenue to be between US$37.8 billion and US$38.2 billion. That is up from the previous, increased estimate of full-year revenue between US$35.6 billion and US$35.9 billion.

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