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Journalism of Courage
Microsoft has reported strong third-quarter revenue growth, but analysts said the company also telegraphed a significant increase in spending, an indication that it was preparing to take on its big online rivals, Google and Yahoo.
The company reported a 13 per cent increase in sales for the quarter, to 10.9 billion, and a 16 per cent rise in net income, to 2.98 billion, in the period a year earlier.
The chief financial officer for Microsoft, Chris Liddell, said: 8216;8216;Over all for the quarter, we are very happy with the continued market momentum we8217;re seeing. Revenue is accelerating for the year8217;8217;.
Despite a bullish stance on revenue, Microsoft evidently surprised analysts by predicting significantly higher expenses in the next fiscal year. Its shares, which had gained 15 cents, to 27.25, in regular trading, fell on the expectation of higher expenses.
Executives also said they did not see any immediate increase in profit on the horizon even as Microsoft prepared for its largest release of new products in more than five years. The company said once again that the update for its new operating system software, Windows Vista, would not be available until January.
For the first time, the company offered guidance on the coming year; its 2007 fiscal year starts in July. Microsoft said revenue for 2007 would be 49.5 billion to 50.5 billion, with earnings expected to be 1.36 to 1.41 a share.
8216;8216;It looks like Microsoft is going to war with Google, and trying to get their product development back in track,8217;8217; said Eugene Munster of Piper Jaffray.
According to Mark Stahlman of Caris 038; Company, the fact that Microsoft plans to spend significantly more in 2007 was an indication of renewed aggressiveness in its competitive strategy and an indication that the company was returning to the kind of actions it exhibited before the Justice Department8217;s antitrust lawsuit in the mid-and late 19908217;s.
8216;8216;It8217;s pretty clear that Bill is running the company again,8217;8217; Stahlman said, referring to Bill Gates, 8216;8216;and they are going to remake the business. They are being much more combative and much more strategically managed8217;8217;.
Sales of Windows for PCs increased 7.5 per cent, to 3.19 billion, in the quarter, while office sales rose 5 per cent, to 2.95 billion. 8212; JOHN MARKOFF
