Microsoft Net Income Tops $2 Bill. For Q2

Beating expectations, the software giant credited its fiscal results with the launches of Windows XP, Xbox and MSN 7.

Sales are up at Microsoft Corp.

The Redmond, Wash., software giant on Thursday posted revenue of $7.74 billion for the quarter ended Dec. 31, 2001, beating analyst expectations. That was an 18 percent increase compared with the same period a year ago.

But Microsoft also reported that it took a $660 million charge for estimated expenses in connection with the more than 100 consumer class-action lawsuits currently pending.

Operating income for the fiscal 2002 2nd quarter came in at $2.84 billion after the charge for legal costs, while net income was $2.28 billion for the period. Diluted earnings per share came in at 41 cents after a provision of 8 cents per share for the estimated charge.

John Connors, Microsofts chief financial officer, was upbeat about the results, saying the record quarterly revenue was achieved on the strength of three very successful product launches: Windows XP, Xbox and MSN 7.

Jim Allchin, group vice president of platforms at Microsoft, said that more than 17 million copies of Windows XP had been sold since it launched on Oct. 25, making it the most successful Windows launch ever.

"Sales to customers by computer manufacturers are more than 300 percent higher than that of Windows 98, and 200 percent higher than Windows Me over the same period," Allchin said. "Microsoft is very optimistic about Windows XP sales in the coming year, for both consumers and businesses. Windows XP drove great results for the Windows division this quarter. Client operating system sales were up 24 percent from last year."

During the quarter, Microsoft also sold 1.5 million Xbox video game systems and the MSN (Microsoft Network) experienced strong growth on the back of the Oct. 25 launch of MSN 7, the newest version of the networks client. MSN now has more than 8 million subscriptions, including more than 7.7 million MSN Internet Access subscribers and in excess of 300,000 subscribers of other MSN premium services, Connors said.

But he cautioned that "while pleased with our results this quarter, we are concerned about the health of the global economy and have yet to see a recovery in many of the worlds largest markets."

Microsoft said it expected revenue for the current quarter to be in the range of $7.3 billion to $7.4 billion. Operating income for the current quarter is expected to come in at between $2.8 billion to $2.9 billion with diluted earnings of 50 cents or 51 cents per share.

For the full fiscal year ended June 30, 2002, Microsoft expected revenue in the range of $28.8 billion to $29.1 billion, operating income of between $11.5 billion and $11.8 billion and diluted earnings of $1.57 to $1.60 per share.