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Economic and IT recovery prospects were given a big boost after a large leap in profits at Microsoft. It also has a huge cash pile of 5 times annual profits. Big Jump Microsoft announced a big jump in profits for its fourth quarter, which has just ended. It had an increase in profits of 26% on the same quarter last year. The huge software company announced quarterly profits of $1.92 billion as opposed to $1.53 billion last year. Just imagine how they would be doing if there was no downturn. Microsoft reported revenue of $8.07 billion, up 11 percent from $7.25 billion for the same period a year ago. For its entire fiscal year, Microsoft reported a profit of $10 billion, or 92 cents a share, compared with $7.8 billion, or 70 cents a share for the previous year. The company posted revenue of $32.2 billion, up from $28.4 billion in 2002. Cash Pile The big news with Microsoft is that it has a huge cash pile of $49 billion – or 5 times annual profits. Shareholders are clamouring for a dividend, which wasn’t paid this time. They did pay one of 8 cents earlier this year, and they have said that they will do so in the future. However, they are reserving money in case some court judgments go against them. There is a one-off charge in their figures of $750 million after settling a legal dispute with AOL Time Warner. According to the company: “Microsoft does "hear the angst that many shareholders" have, said the chief financial officer, John Connors. But although the company settled the AOL Time Warner lawsuit in May, it still faces other legal issues, including an inquiry by the European Union and a lawsuit from Sun Microsystems Inc. "We really have to get through a couple of very significant legal issues both in terms of what the financial impact could be and the business model impact could be," he said. "We don't feel it would be prudent to commit to a long-term program" until the situation is clearer”. Money for Acquisitions When Microsoft do settle their legal disputes, there is a huge wall of cash that they could use for acquisitions. They’re known to want a bigger market share in the Enterprise software arena where SAP lead from Oracle and Peoplesoft. One company mentioned there is Britain’s only FTSE-100 software company Sage. Microsoft said that it would stop issuing stock options to its workers, and start issuing direct stock grants. Expect this to be taken up by other companies. Losing Out to Broadband Microsoft’s internet service MSN Internet lost customers for the second quarter in a row as more and more people switched from dial-up access to broadband. They still have 8.6 million customers. They still increased revenue though because of greater advertising sales. They have increased expectations for this quarter’s figures slightly. All in all those were very good results for Microsoft, and they are one more straw in the wind pointing to a coming recovery. Gerry McLaughlin Jul 21, 2003 Email this article Printer friendly page Previous Page
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