Microsoft announced Thursday that fourth-quarter net income rose 28 percent -- better than Wall Street expected -- on strong sales of its operating systems and business applications.
But, as it does every quarter, the world's biggest PC software publisher warned Wall Street that its growth rate cannot keep up in coming quarters.
Microsoft said that its profit rose to US$1.36 billion, or 50 cents a share, compared with $1.06 billion, or 40 cents, in the comparable fiscal quarter of 1987.
The stock market bellwether beat analyst expectations of 48 cents a share, according to Zack's Investment Research.
"They shot the lights out with a great quarter," said Art Russell, financial analyst at Edward Jones. "Sales of Office and their NT products remain strong, and Windows 98 was taken up a little faster and stronger than a lot of us thought."
Microsoft (MSFT) attributed the results to strong sales of its Office 97 collection of business programs, a tripling of installations of its Windows NT networking software, and strong initial sales of its Windows 98 operating systems.
"A great year for all of our major products was capped by strong initial results from Microsoft Windows 98," which has passed the 1 million mark in unit sales since its 25 June release, said chief financial officer Greg Maffei, in a statement.
Revenue for the quarter ended 30 June rose 26 percent to $4 billion from $3.18 billion last year.
The growth rate, however, will decrease in coming quarters, Microsoft executives said. As Microsoft grows, it becomes tougher for the company to post big gains. The developer also faces a bleak outlook in the Far East, where economies are struggling.
"We are cautious about expected results given the maturity of our products, the Y2K problem ... and the rising US dollar," said Jerry Masters, senior director of planning and reporting, in a conference call.
For the year, net income totaled $4.49 billion, or $1.67 a share, including a $296 million write-off of acquired technology from WebTV. Excluding the write-off, earnings per share would have been $1.78, compared with $1.32 in fiscal 1997.
Separately, Microsoft executives said their Internet directory Start is slated to launch in September. The site will aggregate all of Microsoft's content and media ventures in one place, putting competitive pressure on established directories like Yahoo and Excite.
Microsoft's entry could chill Internet stocks.
"Come September, Microsoft will be stealing business" from the other Internet directories, Russell said.
The earnings results came out after the market closed. Microsoft stock closed unchanged at $117.38, but earlier the stock traded as high as $118.88, the all-time record.
