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Thursday, 18 October, 2001, 23:04 GMT 00:04 UK
Microsoft beats expectations
Microsoft Windows XP promotion in Seoul, South Korea
The hard sell is well under way for Windows XP
Corporate giants Microsoft and Sun Microsystems have beaten Wall Street expectations, on a mixed results night for the US tech sector.

Thursday's high tech results
Microsoft - sales up but cautious about future earnings
Ebay - profits up, healthy outlook
Sun Microsystems - beat estimates but continues to struggle
Gateway - revenues well down
Nortel - huge losses, unable to make a forecast
Microsoft sales rose 5% in the three months to September but there was a 42% drop in profits, largely because of investment losses, a profits statement released late on Wednesday showed.

Operating profits - excluding one-off charges - looked healthy, analysts said, and Microsoft shares climbed in after-hours trading.

Net profit came in at $1.29bn, on sales of $6.13bn, compared with earnings of $2.2bn for the same period last year.

But Microsoft warned that personal computer sales would remain flat until December and it dampened market expectations for performance in the last three months of the year, despite the imminent launch of its Windows XP operating system.

Microsoft headed a raft of high tech companies releasing results on Thursday, as Wall Street's quarterly earnings season reached its height.

Sun losses widen

Losses widened at network computer giant Sun Microsystems, but at $158m for the quarter, remained slightly ahead of Wall Street expectations.

For the three months to the end of September, sales dropped to $2.86bn from $5bn in the same quarter a year ago.

Sun said it would be laying off 9% of employees as the industry-wide slowdown was made worse by the 11 September terror attacks.

"Uncertain year"

Chris Lowe, of First Tennessee, told the BBC's World Business Report that Sun had admitted it faced a " very uncertain year."

"Orders have been not only down in the last couple of weeks, they have also been quite volatile," he said.

"It is almost as if companies doing business with them just don't know quite which direction to turn."

Mr Lowe said the markets had been in a selling mood in the run up to earnings season, but "now that earnings are coming in, even if they are bit weaker than expected, the markets are taking it in their stride."

Gateway and Ebay

Losses at computer maker Gateway were at the bottom end of expectations, at $83m.


In these extraordinary times, we continue to be impressed by the strength and resiliency of our user community

Meg Whitman, Ebay chief executive

But it was a better story at internet auction site Ebay, which met Wall Street forecasts, with a quarterly net profit of $34.856m.

Ebay's third-quarter sales increased to $194m, up 71% on the same period last year.

The company also increased its own revenue estimates for the fourth quarter, but not by as much as analysts had hoped, leading to a fall in Ebay shares in after hours trading.

In a statement, chief executive Meg Whitman, said: "In these extraordinary times, we continue to be impressed by the strength and resiliency of our user community."

Nortel

The situation was more bleak at Canada's Nortel Networks, where falling demand for its telecoms equipment added to a massive $3.5bn third quarter loss.


While we believe we are beginning to see early indications that capital spending by service providers is approaching sustainable levels, it still remains difficult to predict

Frank Dunn, Nortel chief financial officer

The results brought Nortel's losses for the financial year to more than $20bn.

In a measure of the company's problems, Nortel said it would not be able to provide financial guidance for the fourth quarter of 2001 or for next year.

Nortel's chief financial officer Frank Dunn, who is about to become the company's chief executive, said: "While we believe we are beginning to see early indications that capital spending by service providers is approaching sustainable levels, it still remains difficult to predict."

One analyst, who did not wish to be named, said: "At first pass, the revenues are higher than what management said.

"But they still sound skittish about giving guidance, and there is a rumour out that they have lost a big contract to Ciena [a rival company], which would be more important than these numbers."

General Motors

Earlier, some of America's most high profile companies put out results, including General Motors, which warned of tough times ahead, and Boeing, which posted improvements in profits but also warned of a rough ride in the months ahead.

Coca-Cola, McDonalds, Colgate-Palmolive and tobacco company RJ Reynolds all reported profits at the top end of market expectations for July to September.

Meanwhile, shares in Apple Computer jumped $1.01, or 5.9%, to $18, after the company's earnings topped the previous quarter's results.

But it warned the 11 September attacks would hurt the current quarter.

 WATCH/LISTEN
 ON THIS STORY
First Tennessee's Chris Lowe
"Sun faces a very uncertain year ahead"
Deutsche Bank's Cary Leahy
"All the earnings were pretty dismal"
See also:

18 Oct 01 | Business
GM warns of tough times ahead
18 Oct 01 | Business
Boeing profits rise but layoffs loom
18 Oct 01 | Business
US consumer giants raise profits
18 Oct 01 | Business
Software firm shares plunge 23%
18 Oct 01 | Business
SAP shares plunge 17%
17 Oct 01 | Business
Subscriptions prop up AOL results
17 Oct 01 | New Media
Release date for Microsoft's Xbox
18 Oct 01 | Business
Global PC sales continue to fall
05 Oct 01 | Business
Sun and AMD deepen tech gloom
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