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Thursday, 17 January, 2002, 21:59 GMT
Microsoft 'concerned' over global economy
Microsoft's Bill Gates
Microsoft, IBM and Nortel have reported results at the higher end of analysts' expectations, but warned of difficulties in the global economy.

Profits at Microsoft slumped 13% in the October-to-December quarter despite record revenues of $7.74bn from the sale of Windows XP and Xbox games consoles.

We are concerned about the health of the global economy and have yet to see a recovery in many of the world's largest markets

John Connors
Microsoft posted a net profit of $2.28bn for the quarter, after taking a charge of $660m to settle consumer lawsuits.

"We reported record revenue this quarter on the strength of three very successful product launches," said John Connors, chief financial officer at Microsoft.

Those launches helped diversify the company's revenue base but also have dragged down overall profit margins.

The Xbox is thought to be costing Microsoft more than $100 per console sold and it may take several years before it starts making money on games sales.

"While we are pleased with our results this quarter, we are concerned about the health of the global economy and have yet to see a recovery in many of the world's largest markets," he said.

IBM's 'difficult conditions'

IBM reported a fall in fourth-quarter profits from a year ago and the second quarterly decline in a row, as the economic slowdown caused customers to delay new technology spending.

The computer giant, which sells everything from PCs to giant mainframes to software to consulting services, made a profit of $2.3bn, down from $2.7bn in the same period a year ago, at the higher end of analysts expectations.

Revenues fell to $22.8bn, down from $25.6bn.

"Business conditions remain difficult as we enter the new year, although we believe that our business will strengthen as we move through the year," said IBM chief executive Louis Gerstner in a statement.

Nortel 'well placed'

Nortel Networks, which is among the world's biggest makers of telecom equipment, said net fourth quarter losses, including acquisition and restructuring costs, were $1.8bn.

Fourth-quarter sales were slightly higher than expected but Nortel forecast a further 10% slide in revenues in the next quarter.

Analysts expect the Canadian company will fare better than its rivals this year after harsh restructuring during which its workforce nearly halved.

"Nortel took a lot of grief early on in 2001 for the amount of people it was letting go and the percentage of the workforce it was letting go," said John Wilson, managing director at RBC Capital Markets.

"But on reflection, it turns out everybody seemed to be doing a very similar amount of restructuring.

"In the end, you're going to be better off doing it sooner rather than later."

See also:

21 Dec 01 | Business
Nortel cheers investors
16 Oct 01 | Business
Big Blue sees profits slide
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