Microsoft Warns on First-Quarter Earnings

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Shares of Microsoft Corp. dipped 3 percent in extended trading Thursday after the software giant warned that its fiscal first-quarter earnings and revenues will fall short of Wall Street's expectations.

The warning came as Microsoft said it had barely eked out a profit of $66 million or 1 cent a share in its fourth quarter ended June 30. That compares with net earnings of $2.41 billion, or 44 cents a share, in the same period last year.

The earnings number includes a massive $2.6 billion charge for the quarter for poor-performing investments.

Analysts polled by Thomson Financial/First Call had predicted earnings of 43 cents a share before the charge; Microsoft did not provide a comparable figure in its earnings release, however.

Revenues for the quarter ended June 30 were $6.58 billion, up 13 percent from $5.8 billion last year and in line with what Microsoft forecast last week.

Citing continued softening demand for personal computers, Microsoft also said it expects profits in the first quarter of its fiscal year to be between 39 cents and 40 cents, well below analysts' expectations of 45 cents. It forecast revenue of $6 billion to $6.2 billion for the first quarter, slightly below analysts' projections of $6.27 billion.

Shares of Microsoft fell $2.70 in after-hours trading after finishing the regular session on the Nasdaq Stock Market up $2.00 to $72.57.

Microsoft chief financial officer John Connors said he expects earnings to pick up in its fiscal second quarter, when the company's new operating system, Windows XP, is due to be released.

"In light of the current economic environment in the U.S. and worldwide, the fact that Microsoft has been able to grow revenue as well as operating income is viewed as quite positive, and in this market, and I think even any slight good news is well-received," Connors said.

For the fiscal year ended June 30, Microsoft had earnings of income of $7.35 billion, or $1.32 a share, on revenue of $25.3 billion. For fiscal year 2000, earnings were $9.42 billion, or $1.70 a share, on revenue of $22.96 billion.