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In its second fiscal quarter results released on Thursday, the software giant said net income was USD2,283 million, or USD.41 per share, compared to USD2,624 million the same period a year earlier, including a one-time charge of USD660 million in connection with the lawsuit settlements.
One limiting factor was the poor performance of personal computer shipments for consumers and business customers, which were down five percent in the quarter, worse than Microsoft had expected. The company said it believed PC shipments would continue to decline for the remainder of the fiscal year, which ends in June for Microsoft.
In positive news the company saw revenue up strongly to USD7.74 billion for the quarter ended 31 December 2001, an 18 percent jump over the same period last year.
The company, which employs some 1,700 in Ireland, offered a conservative outlook for the current quarter as well as its full fiscal year. Microsoft expects operating income in the current quarter to show little growth over the previous quarter, reaching USD2.8 million to USD2.9 million. For the full year the company expects operating income in the range of USD11.5 to USD11.8 billion.
Speaking to reporters and analysts on Thursday, chief financial officer John Connors poured cold water on the idea that a strong IT industry recovery was coming soon. He said there was no evidence that the conservatism in IT spending will ease up soon, and said its estimates were that PC sales would continue to decline.
"We think it is too early to assume that a recovery is underway in the major economies around the world. This view is implicit in our forecast," Connors said.
"In looking at growth and earnings expectations in the coming year for the technology industry generally and Microsoft specifically, many must be assuming a booming recovery versus a more modest recovery. We don't see a booming recovery any time soon."
He also noted that the sag in the on-line advertising industry, which affects revenue for the company's MSN Internet properties, has continued. While MSN did win major new advertising contracts with clients including Volvo during the quarter, Connors said that the company "would not be immune" if the demand for on-line advertising showed further decline.
The company said it was pleased with the take-up for its new Windows XP operating system, which sold 17 million copies between October and January, and for its Xbox games console which sold 1.5 million units in North America in the quarter ended 31 December.
Microsoft also claimed that third party developers for Xbox, which is due to launch in Europe in March, sold 50 percent more games for Xbox during the quarter than for its rival, Nintendo's GameCube. Microsoft said it projected total unit sales of Xbox this fiscal year would be between 4.5 million and 6 million.
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