Friday, January 28, 2005
January 28, 2005
Windows, Boxes and a Halo Bolster Microsoft ProfitBy LAURIE J. FLYNN
icrosoft posted solid growth in quarterly sales and profit yesterday, buoyed by strong holiday sales of personal computers and video games.
Microsoft, the world's largest software company, said sales for the second quarter rose 7 percent, to $10.82 billion, surpassing the $10.55 billion average of Wall Street analysts' estimates.
"This was yet another excellent quarter," said John Connors, chief financial officer at Microsoft. "In general, the economic environment is healthy."
Microsoft earned 32 cents a share during the quarter on profit of $3.46 billion. That compares with a profit of 14 cents a share, or $1.55 billion, in the year-earlier period, when the company took a $2.21 billion charge for an employee stock-option exchange program. Excluding a stock-based compensation expense in the latest quarter, Microsoft said, it had a profit of 35 cents a share, beating analysts' forecast of 33 cents.
Shares of Microsoft, which reported its results after the close of regular trading, rose 10 cents, to close at $26.11, then rose as high as $26.60 in after-hours trading.
Some of Microsoft's new businesses did well, including its home and entertainment division, which posted its first profit. Sales in that division were led by Halo 2, a science-fiction video game featuring a genetically enhanced "supersoldier," which helped turn Microsoft's Xbox into the best-selling game console on the market during the holidays. The company said it had sold more than six million copies of the game since it was released in November.
Over all, the games unit had a profit of $84 million, in contrast to a loss of $397 million in the year-earlier period. Mr. Connors warned that the company did not expect the business to continue to post a profit this year, though it is on track to reach sustained profitability in 2007.
Most of the company's traditional businesses also posted strong sales, which company executives attributed to an increase in sales of personal computers and servers. Revenue from the Windows operating system division increased 5.3 percent, to $3.22 billion.
But the brightest spot was Microsoft's server and tools business, which grew 18 percent during the quarter, to $2.52 billion from $2.15 billion a year earlier. "The world is buying a heck of a lot of servers," Mr. Connors said.
Revenue from the SQL Server product alone grew 25 percent, indicating that Linux, a free open-source operating system used to run many servers, is posing less of a threat to Microsoft's corporate business than people may think.
"Linux is an issue, but it's not the Microsoft killer it's made out to be," said Charles J. Di Bona, an analyst with Sanford C. Bernstein & Company. "They're holding their own."
Analysts said the gains in Microsoft's server business indicated a strengthening corporate market. "It's a good sign of demand for enterprise PC's," said Gene A. Munster, an analyst at Piper Jaffray.
Mr. Munster described the quarter as solid, but said Microsoft still faced the considerable challenge of being a mature technology company. Successes like Halo 2, for example, "don't come around every quarter," he said.
The company's MSN Web sites had a profit of $130 million during the quarter, after losing $95 million a year earlier. Mr. Connors said that advertising revenue was increasing for the MSN business, but that the gains were offset by a decline in revenue from Internet access fees as customers move toward higher-speed broadband access. Revenue rose 7.7 percent, to $588 million.
Analysts characterized the quarter as strong, though some cautioned that the success of Halo 2 was a one-time event. Still, the company posted solid gains in major businesses, most notably Windows, which accounts for the majority of its revenues.
Microsoft raised its forecast for the full year. The company now expects to earn $1.09 to $1.11 a share, up from its previous forecast of $1.07 to $1.09. Revenue is now expected to be $39.8 billion to $40 billion.
For the third quarter, Microsoft predicts earnings of 27 cents to 28 cents a share on revenue of $9.7 billion to $9.8 billion, in large part on improvements in corporate spending.
Mr. Connors said Microsoft expected PC shipments to increase 9 percent to 11 percent during the rest of 2005, up from an earlier forecast of 8 percent to 10 percent.
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Windows, Boxes and a Halo Bolster Microsoft ProfitBy LAURIE J. FLYNN
icrosoft posted solid growth in quarterly sales and profit yesterday, buoyed by strong holiday sales of personal computers and video games.
Microsoft, the world's largest software company, said sales for the second quarter rose 7 percent, to $10.82 billion, surpassing the $10.55 billion average of Wall Street analysts' estimates.
"This was yet another excellent quarter," said John Connors, chief financial officer at Microsoft. "In general, the economic environment is healthy."
Microsoft earned 32 cents a share during the quarter on profit of $3.46 billion. That compares with a profit of 14 cents a share, or $1.55 billion, in the year-earlier period, when the company took a $2.21 billion charge for an employee stock-option exchange program. Excluding a stock-based compensation expense in the latest quarter, Microsoft said, it had a profit of 35 cents a share, beating analysts' forecast of 33 cents.
Shares of Microsoft, which reported its results after the close of regular trading, rose 10 cents, to close at $26.11, then rose as high as $26.60 in after-hours trading.
Some of Microsoft's new businesses did well, including its home and entertainment division, which posted its first profit. Sales in that division were led by Halo 2, a science-fiction video game featuring a genetically enhanced "supersoldier," which helped turn Microsoft's Xbox into the best-selling game console on the market during the holidays. The company said it had sold more than six million copies of the game since it was released in November.
Over all, the games unit had a profit of $84 million, in contrast to a loss of $397 million in the year-earlier period. Mr. Connors warned that the company did not expect the business to continue to post a profit this year, though it is on track to reach sustained profitability in 2007.
Most of the company's traditional businesses also posted strong sales, which company executives attributed to an increase in sales of personal computers and servers. Revenue from the Windows operating system division increased 5.3 percent, to $3.22 billion.
But the brightest spot was Microsoft's server and tools business, which grew 18 percent during the quarter, to $2.52 billion from $2.15 billion a year earlier. "The world is buying a heck of a lot of servers," Mr. Connors said.
Revenue from the SQL Server product alone grew 25 percent, indicating that Linux, a free open-source operating system used to run many servers, is posing less of a threat to Microsoft's corporate business than people may think.
"Linux is an issue, but it's not the Microsoft killer it's made out to be," said Charles J. Di Bona, an analyst with Sanford C. Bernstein & Company. "They're holding their own."
Analysts said the gains in Microsoft's server business indicated a strengthening corporate market. "It's a good sign of demand for enterprise PC's," said Gene A. Munster, an analyst at Piper Jaffray.
Mr. Munster described the quarter as solid, but said Microsoft still faced the considerable challenge of being a mature technology company. Successes like Halo 2, for example, "don't come around every quarter," he said.
The company's MSN Web sites had a profit of $130 million during the quarter, after losing $95 million a year earlier. Mr. Connors said that advertising revenue was increasing for the MSN business, but that the gains were offset by a decline in revenue from Internet access fees as customers move toward higher-speed broadband access. Revenue rose 7.7 percent, to $588 million.
Analysts characterized the quarter as strong, though some cautioned that the success of Halo 2 was a one-time event. Still, the company posted solid gains in major businesses, most notably Windows, which accounts for the majority of its revenues.
Microsoft raised its forecast for the full year. The company now expects to earn $1.09 to $1.11 a share, up from its previous forecast of $1.07 to $1.09. Revenue is now expected to be $39.8 billion to $40 billion.
For the third quarter, Microsoft predicts earnings of 27 cents to 28 cents a share on revenue of $9.7 billion to $9.8 billion, in large part on improvements in corporate spending.
Mr. Connors said Microsoft expected PC shipments to increase 9 percent to 11 percent during the rest of 2005, up from an earlier forecast of 8 percent to 10 percent.
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Lance Cpl. Tony Hernandez, from Canyon Lake, Tex., lost more than 20 pounds to join the Marines, his father, Leroy, said. Corporal Hernandez was one of 31 killed in a helicopter crash on WednesdayJanuary 28, 2005For Troops' Loved Ones, a Day of Loss and Dreams Cut ShortBy JAMES BARRON and SARAH KERSHAW There was the mechanic from Texas, a chunky redhead the Marines rejected the first time he tried to enlist, before he lost the 23 pounds.There was the corporal from New Jersey whose father served in Vietnam, whose grandfather served in Korea and whose older brother, also a lance corporal, expects to leave for Iraq by mid-March.There was the reservist from Virginia who posted photographs he took with his two-megapixel digital camera on a Web site he set up. One image showed him cradling a captured rifle. The troops who died Wednesday on the deadliest day for the troops in Iraq were young, and they came from across the country, from Vermont and California, from Texas, Ohio and New Jersey. Yesterday, as the grim news sank in, families grieved for the 30 marines and the sailor who died when their helicopter crashed in a sandstorm and for six other service members who died in combat in Iraq on Wednesday. Twenty-seven of the dead were based at Marine Corps Base Hawaii-Kaneohe Bay.Now their loved ones have only the memories, and the e-mail messages and letters they sent home. And some do not even have those. Cpl. Christopher L. Weaver, 24, left his girlfriend, Danell Weaver, wondering what was in the epistle he had mentioned but had not mailed. They met in college, and had made having the same last name a running joke, especially after they began talking about getting married."He said it was, like, 18 pages and about how much he loved me," Ms. Weaver said of the letter in a telephone interview. "It was our story. It was basically about our courtship, how he fell in love with me and things like that. He was a historian. He really liked putting things in writing so they'd be safe forever." Military officials said they were investigating the helicopter crash, which took place in western Iraq early Wednesday near Rutba, a town in western Iraq about 70 miles from the Jordanian border, but they released no further details on what might have caused the CH-53E Super Stallion to go down. The troops on board had been so eager, their loved ones said."I remember when the war started he was in Hawaii and I said, I'm glad they didn't send you to Iraq," said Belga Saintvil, whose son, Cpl. Gael Saintvil, 24, died in the crash. "But he said he wanted to go, to perform his duty."The mechanic, Lance Cpl. Tony Hernandez, died 11 days before his first anniversary, Feb. 7. His widow, Jacquie Hernandez, called him a hardcore marine and recalled how, before they began dating, they had argued about his decision to join the corps. "It was tough when he found out he was going to Iraq," she said, "but to him it was worth it. He believed in what he was doing." She said he had had at least one close call, when a nearby explosion lifted him off the ground and threw him down, but he was not seriously hurt.Corporal Hernandez's father, Leroy, of Canyon Lake, Tex., said his son had become "gung-ho about joining the Marines" while in a junior reserve officer training program in high school. But the Marines turned down Tony Hernandez when he graduated in 2001 because of his weight."He was probably, I would guess, 210," Leroy Hernandez said, too heavy for a would-be recruit who was only 5 feet 7 inches tall.But after one semester at San Antonio College, Tony Hernandez and a friend went to a marine recruiter who put Tony on an exercise program. His target was 187 pounds."He got very motivated," Mr. Hernandez said.And before long the Marines sent him to boot camp. By the time he left for Iraq last summer, Mr. Hernandez said he almost did not recognize his leaner, tougher son. Corporal Hernandez had been told he would be sent home in March, Mr. Hernandez said.Cpl. Sean Kelly was also approaching the end of his tour in Iraq. He told his family in Pitman, N.J., that he expected to leave early next month. And, like Corporal Hernandez, he had settled on the military while in high school. "In the future," he wrote in the yearbook, "I plan on being a United States Marine."His parents said he never openly expressed fear or doubt about being in Iraq. "He knew the risks," said his father, Alexander, who served in the military in Vietnam. His grandfathers also served, one in the British Army in World War II, the other in the Navy in the Korean War. An uncle is also a Marine, the Kellys said.Corporal Kelly "was fulfilling his life choices," his mother, Lynn, said. "He was proud to be there fighting for our country. We were proud of him and he was very proud to be doing what he was doing, and his loss is going to be a very big void for us."His brother, Lance Cpl. Ryan Kelly, 25, enlisted in 2003 and expects to be sent to Iraq in the next six to eight weeks. "It's his choice to continue, his journey," Mrs. Kelly said, "and we will just keep him in our prayers."Sgt. Jesse Strong, 24, of Orleans, Vt., had made a lasting impression at Liberty University, whose chancellor is the Rev. Jerry Falwell, the pastor of Thomas Road Baptist Church, also in Lynchburg, Va. Sergeant Strong was in the Marine Corps while attending Liberty and often wore his uniform to campus events, including banquets and end-of-the year celebrations, even when formal dress was not required, said those who knew him there. Dwayne Carson, a campus pastor who became a close friend, said Sergeant Strong had been a prayer leader and spoke frequently of his desire to go on active duty. "I knew he wanted to serve his country," he said. "I knew he was very proud of our country."Some of the troops had contacted their families just this week. Some had not heard anything for a while. Sgt. Michael Finke Jr., 28, called his father in Ohio on Tuesday to say he expected to leave Iraq early next month."I asked about sending a package," Mr. Finke said, "and he said no, he thought he would be shipping out by Feb. 4 or 5."By contrast, Sue-Lane Moore last heard from her grandson, Cpl. James L. Moore, 24, as the year began. She did not know where he was when he called. He said he could not tell her, but she remembered what he said."He says, Grandma, I'd rather be fighting them here than to have them come there to fight," Ms. Moore, 69, recalled, through her sobs, in a telephone interview from her home in Salem, Ore. "He was doing what he felt was right. If that's what he wanted to do, I believed it was the right thing to do."Lance Cpl. Karl Linn, a marine reservist from Midlothian, Va., who was killed in Al Anbar province on Wednesday, left behind a Web site (www.karl.linn.net) with photographs he had posted just last week. He apologized on the home page for the site's "improvised" look. "I'm working with what tools I have available," he wrote, "and polishing up the details when I can."Corporal Linn's e-mail messages home tended to be breezy and upbeat, his father, Richard Linn, said yesterday. Mr. Linn talked about how they had practiced shooting at local firing ranges and how one year Mr. Linn gave his son a Chinese-made semiautomatic rifle. "But he was more of a thinker and a designer," he said. Corporal Linn had been a engineering student at Virginia Commonwealth University when his unit was called to active duty. Corporal Linn accepted the assignment willingly, his father said. "He wanted to pay back society for what he had been given," Mr. Linn said.Reporting for this article was contributed by Lisa Bacon in Richmond, Va.; Chris Dixon in Miramar, Calif.; John Holl in Pitman, N.J.; and Thomas J. Lueck in New York.Copyright 2005 The New York Times Company Home Privacy Policy Search Corrections RSS Help Back to Top
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