Microsoft revenues up 10pc, but cuts sales forecast

17 Jan 2003

Software behemoth Microsoft set its first ever annual stock dividend and a two-for-one stock split after reporting a 10pc hike in revenues to US$8.54bn. However, looking ahead to the next quarter ending in March, the company forecasts a more conservative outlook with revenues in the range of US$7.7bn and US$7.8bn anticipated.

The annual dividend will be 8 cents a share and comes after mounting pressure from investors who in the face of changing fortunes in the computing industry have seen Microsoft’s stock decline steadily in the past two to three years. The wideheld belief is that Microsoft can’t reinvest cash as quickly as it piles up the profits.

In a statement, Microsoft’s CFO John Connors says: “Declaring a dividend demonstrates the board’s confidence in the company’s long-term growth opportunities and financial strength. We are especially pleased to be able to return profits to our shareholders, while maintaining our significant research and development efforts and satisfying our long-term capital requirements.”

Microsoft’s operating income for the second quarter was US$3.26bn, including an additional US$210m charge reflecting the company’s estimated costs related to resolving pending anti-trust and unfair competition class action lawsuits being brought in the US.

Connors attributes the ‘solid results’ despite challenging global economic conditions to the introduction of a broad range of products, including the tablet PC, Windows XP, Xbox Live and the Windows-powered Smartphone. “While we are very optimistic about the future of the technology sector, we do not expect to see a significant upturn in global IT spending in the short term.”

Microsoft’s portal division, MSN, saw an increase of over 40pc in online advertising and the software giant’s games platform, the Xbox, sold more than 8 million in units since its introduction in November 2001.

In looking ahead to the full fiscal year ending June 30, the company said it expected revenues to be in the range of US$31.9bn and US$32.1bn.

By John Kennedy