Microsoft Announces Record Quarterly Profits

Microsoft Announces Record Quarterly Profits

Redmond, Washington, January 21, 1998 — Microsoft Corporation today announced net income of $1.13 billion, and earnings per share of $0.85 for the quarter ended December 31, 1997, a 49% increase over the $0.57 earnings per share reported for the corresponding quarter last year. Revenues totaled $3.59 billion, a 34% increase over the $2.68 billion during the same quarter last year.

“European revenues were up 33% over the same quarter last year and OEM revenues expanded 40%,”
noted Greg Maffei, chief financial officer.
“But the news isn’t all good, as revenues from Southeast Asia and the Far East declined 8% from the prior quarter. Economic weakness in these geographies clouds the outlook for calendar 1998.”

Microsoft Ò Office 97 continued its impressive momentum by posting its third consecutive quarter of increased shipments, while the Microsoft Windows Ò 95 operating system was seasonally strong.
“Office 97 continues to be a success because it offers customers ease of use, reduced cost of ownership, and true web integration,”
said Jon DeVaan, vice president, Desktop Applications Division.

Microsoft Office 97 collected PC Computing ‘s MVP award at Comdex this year, reflecting the quality of the product. Also honored for excellence at Comdex were Microsoft Internet Explorer 4.0, the Microsoft FrontPage Ò97 web site creation and management tool, Internet Information Server 3.0, Microsoft Picture It!™ personal imaging software, the Microsoft Visual Basic Ò development system 5.0, and Site Server Enterprise Edition.

During the quarter, Microsoft released several new products, including Microsoft BackOffice ÒSmall Business Server 4.0 and Microsoft SQL Server™ 6.5 Enterprise Edition, as well as updated versions of existing products, including Microsoft BackOffice Server 4.0, Microsoft Exchange Server 5.5, new Enterprise editions of Microsoft SQL Server and Microsoft Windows NT Ò Server, Microsoft Windows CE operating system 2.0, and The Microsoft Network 2.5.

Microsoft also announced several key alliances during the quarter, pledging to work more closely together with Unisys to further support Windows NT in the enterprise, and with Silicon Graphics to increasingly define cutting-edge graphics capabilities for Microsoft DirectX Ò Multimedia Services for Microsoft Windows.

Subsequent to the quarter’s end, Tele-Communications Inc. (TCI) announced that it had signed an agreement to license a version of the Microsoft Windows CE operating system for a minimum of five million digital set-top boxes. Additional support for the Windows CE platform was demonstrated as third parties announced their plans for the Auto PC and the Palm PC, both based on the Windows CE operating system.

A very recent survey published in the latest Fortune Magazine concluded that 73% of people consider Microsoft one of America’s great businesses, and 78% believe that Microsoft produces high-quality products.
“We’re gratified by these results,”
noted Bob Herbold, Microsoft’s chief operating officer.
“For 23 years, Microsoft has grown by listening to our customers and helping them be more productive at work, at school, and at home. We’ve succeeded by working to use the power of personal computing to improve the quality of people’s lives. The strong results of this quarter – coupled with surveys like the one by Fortune and the recent Hart-Teeter survey – are testimony that our customers think we are on the right track.”

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 “MSFT”) 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, BackOffice, DirectX, FrontPage, Picture It!, Visual Basic, 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.

For More Information, Analysts Only:

Carla Lewis, Senior Director, Investor Relations, (425) 936-3703

For More Information, Press Only:

Tom Pilla, Microsoft Corporation, (425) 882-8080

Heidi Rothauser, Waggener Edstrom, (425) 637-9097

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at on Microsoft’s corporate information pages. Shareholder and financial information as well as today’s 2:30 p.m. PST conference call with financial analysts is available at .

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