Office 97 Fuels Record Quarterly Results for Microsoft

Redmond, Washington, April 17, 1997 — Microsoft Corporation today announced net income of $1.04 billion, and earnings per share of $0.79 for the quarter ended March 31, 1997, an 80% increase over the $0.44 earnings per share reported for the corresponding quarter last year. Revenues totaled $3.21 billion, a 45% increase over the $2.21 billion during the same quarter last year.

Worldwide acceptance of Microsoft ÒOffice 97 ignited these outstanding results,”
noted Mike Brown, chief financial officer.

As corporate and retail customers upgraded to this new product with enthusiasm, we also realized solid gains in the OEM channel because of the continued popularity of 32-bit Windows Òoperating systems. And we reaped the benefits of an improved cost model. However, incredible results like these are seldom duplicated, and we are mindful of the very tough comparisons we will have in fiscal 1998.”

“We’ve sold more than 8 million licenses of Office 97 applications,”
stated Richard Fade, vice president, Desktop Applications Division,
“and Office 97 is selling at three times the rate of any previous version. There are now over 60 million users of Office applications and customers are migrating rapidly to the new version, with over 70 percent of Fortune 1000 companies already deploying or actively evaluating Office 97. We made significant investments in Internet integration, communications capabilities, and ease of use, and those investments have really paid off, both in revenues and customer enthusiasm.”

“This phenomenal performance is a result of Microsoft’s long-term commitment to investment in R & D and focus on developing compelling, innovative products that can emerge as leaders,”
said Bob Herbold, chief operating officer.
“Currently, we are investing heavily in a range of new Internet-related products, especially in interactive media, where the business models and sources of profitability are not yet clear.”

During the quarter, Microsoft announced a series of initiatives focused on reducing the total cost of PC ownership. In March, Microsoft and Intel jointly announced the Network PC (NetPC) Reference Platform, a broad industry effort to reduce the cost of managing a distributed PC environment while delivering the business flexibility, performance range, and network and application compatibility needed to increase customers’ overall return on investment. This reference specification is supported by more than 100 of the world’s top PC manufacturers, including Compaq Computer Corp., Dell Computer Corp. and Hewlett-Packard Co. In addition, Hewlett-Packard and Microsoft announced a joint initiative focused on products, services and technology that help customers build, implement and manage cost-effective enterprise environments.

Microsoft also announced the Zero Administration Kit for the Windows NT®
Workstation operating system version 4.0, a set of tools to reduce the cost of ownership that provides centralized configuration of the desktop and allows applications and data to be accessed from the server.

Microsoft Exchange Server 5.0 was released, providing customers with native Internet messaging and collaboration to deliver business solutions.

Use of Microsoft’s Internet Explorer browser reached major milestones, with independent studies showing over 15 million active users of Microsoft Internet Explorer. Corporate customers, including Continental Airlines, Reynolds Metals, and Coopers & Lybrand are moving to Internet Explorer in record numbers. Over 350 companies, representing a potential 6.6 million desktops, have selected Microsoft Internet Explorer for use in their organizations to date. Continued acceptance of Internet Explorer internationally, due in part to Microsoft’s ongoing leadership role in providing localized language versions of the Internet Explorer 3.0 browser, was demonstrated by the fact that Internet Explorer for the first time accounted for more than 50% of hits on several popular international web sites.

Subsequent to the quarter’s end, Microsoft announced the signing of a definitive agreement to acquire WebTV Networks Inc. for approximately $425,000,000 in stock and cash, underscoring the company’s strategy to deliver the benefits of the Internet together with emerging forms of digital broadcasting. Separately, Compaq, Microsoft and Intel announced an initiative to work with the television industry to broaden and accelerate digital TV opportunities. Together with existing efforts with Windows and Windows CE, these should allow Microsoft to support Internet applications on television appliances, and to support current and future higher definition video services on both PCs and TVs.

This press release contains statements that are forward looking. These statements are based on current expectations that are subject to risks and uncertainties. Actual results will vary because of factors such as PC shipment growth, product ship schedules, life cycles, terms and conditions, product mix, competitive products and pricing, customer demand, technological shifts and other issues discussed in the Company’s Form 10-K.

Founded in 1975, Microsoft (NASDAQ
) is the worldwide leader in software for personal computers. The company offers a wide range of products and services for business and personal use, each designed with the mission of making it easier and more enjoyable for people to take advantage of the full power of personal computing every day.

Microsoft Windows and Windows NT are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. Other products and company names mentioned herein may be the trademarks of their respective owners

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