Microsoft earnings meet forecasts

Slower US computer sales have hit earnings

Microsoft has reported a modest rise in quarterly profits, meeting analysts lowered expectations.

But the US software giant said it remained "guarded" on its prospects for the near future, forecasting a decline in revenue in the January-March quarter.

It said net earnings for the quarter ended 31 December reached $2.62bn (£1.78bn) compared with $2.44bn a year previously. Revenues in the period stood at $6.59bn, up 8% from $6.11bn a year earlier.

In December, the company had joined a string of other tech sector firms warning that slowing personal computer (PC) sales and corporate technology purchasing would hit earnings.

Biggest concern

On Thursday, Microsoft said weak PC demand remained its biggest concern. It was "looking for the fiscal year 2001 PC unit growth rate to be... 10% at best," chief financial officer John Connors said.

"While we are enthusiastic about the breakthrough products and services the company will be delivering in 2001, we remain guarded about the near-term economic outlook and its impact on PC demand and technology spending," Mr Connors said.

Microsoft predicted revenues for the next quarter would decline to $6.3bn-6.4bn.

Before the results were announced, Microsoft shares closed up 4.8% on the day at $55.50.

But they remain slumped well below the high of more than $116 reached a year ago.

Bad publicity

Since then, the company has been fighting a court ruling that it should be broken up on anti-trust grounds.

It has also suffered the bad publicity of being sued for racial discrimination and has settled a long-standing legal case brought by thousands of temporary staff who claimed they were denied benefits.

Like other major tech players, its share price has also not been immune to the general gloom overshadowing the sector.

Sun Microsystems

Network computer maker Sun Microsystems also met analyst expectations with its results.

The firm - one of few in the sector not to issue a profits warning - said second-quarter sales rose 44% to $5.12bn.

Operating earnings stood at $552m, up from $354m a year earlier.

The company has not been exposed to the slowdown in retail sales of computers: Its products are aimed at the business market, where demand has been more robust.

However, analysts said they would be watching Sun's performance in this earnings period for evidence that a slowdown in the US economy was now feeding through to lower spending by companies on computer infrastructure.

Sun's chief financial officer Michael Lehman said in a statement: "Going forward, we have not changed our message regarding our intention to invest aggressively for market share while, at the same time, delivering on our commitment to generating competitive earnings for our shareholders."