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Thursday, 18 April, 2002, 20:54 GMT 21:54 UK
Microsoft profits disappoint
Bill Gates with Microsoft Windows
Microsoft still in the money
News of higher profits from software giant Microsoft has failed to satisfy investors, prompting a sell-off in the company's shares.

Our expectations for enterprise IT spending levels continue to be quite modest

Microsoft chief financial officer John Connors
Microsoft said net profits for the three months to March rose to $2.74bn, 12% up on the same period one year ago.

The figure, boosted by the $847m sale of its online travel operation Expedia to media firm USA Networks, came in at the bottom end of analysts' forecasts.

The numbers disappointed investors, who marked Microsoft shares 7% lower at $52.38 in after-hours trade shortly after the company published its earnings statement.

Cautious forecast

Total sales for the period were 13% up on the year at $7.25bn, but fell short of the $7.34bn predicted by analysts.

Cautious sales and income forecasts from the company also dampened investor sentiment.

"While we look forward to slightly improved (personal computer) growth rates for the next quarter, our expectations for enterprise IT spending levels continue to be quite modest," said Microsoft chief financial officer John Connors.

He added that the company's latest projections for 2003 operating income "are definitely lower than the average of analysts out there."

Earlier on Thursday, Microsoft cut the price of its Xbox games console in the UK and Europe by a third in an attempt at kick-starting sales.

The Xbox, aimed at capturing market share from Sony's rival games console Playstation, now costs just 199 in the UK, down from 300.

Competition concerns

Last year, Microsoft narrowly escaped being broken up after the US courts found it guilty of anti-competitive behaviour.

Microsoft is the maker of the Windows operating system, used to operate most personal computers.

Critics allege that it has used its ownership of the world's most widely-used operating system to edge rival software products out of the market.

In January, media giant AOL Time Warner sued Microsoft for allegedly forcing licensees of its dominant Windows operating system to use Microsoft's own Explorer browser.

AOL claims that this strategy unfairly displaced its Netscape browser as the most widely-used internet search tool.

Microsoft is also facing a $1bn lawsuit from network computer maker Sun Microsystems, which claims that the software giant made its XP system incompatible with Sun's Java programming language.

See also:

28 Feb 02 | Business
Microsoft and US refine settlement
03 Nov 01 | Business
Microsoft continues aggressive ways
02 Nov 01 | Business
Outline of proposed settlement
08 Mar 02 | Business
Sun sues Microsoft
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