Microsoft Announces Record Fiscal 1998 Revenue and Income

Redmond, Washington, July 16, 1998 — Microsoft Corporation today announced revenue of $14.48 billion for the fiscal year ended June 30, 1998, a 28% increase over the $11.36 billion reported last year. Net income totaled $4.49 billion, including the previously announced $296 million write-off of acquired in-process technology related to the purchase of WebTV. Earnings per share were $1.67. Excluding the one-time write-off, earnings per share of $1.78 represented a 35% increase compared to $1.32 in fiscal 1997.

Revenue for the quarter ended June 30, 1998 was $4.0 billion, a 26% increase over the comparable quarter in fiscal 1997. For the quarter, net income was $1.36 billion, and earnings per share were $0.50, an increase of 25% compared to the $0.40 earned during the same quarter last year.

A great year for all of our major products was capped by strong initial results from Microsoft Ò Windows Ò98,”
said Greg Maffei, chief financial officer.
“In particular, customer enthusiasm for Office 97 reinforced its position as the leading productivity suite for business use.”

“We are pleased to announce today that more than one million retail licenses of Windows 98 Upgrades have already been purchased in North America since the product’s June 25th release,”
said Brad Chase, vice president, Windows marketing.
“Even more encouraging is the strong customer satisfaction, with 9 out of 10 Windows 98 home users stating they are satisfied with the product, as measured by an independent market research firm.”

In the enterprise arena, corporate customers continued to adopt Windows NT, building on the trend toward low-cost, high-volume PC-based systems. Microsoft Windows NT Ò Workstation reached an installed base of 15 million units, while deployments of Windows NT Server increased 200 percent in Fortune 1,000 companies in the past 12 months, according to Computer Intelligence, Inc. Microsoft Exchange Server once again posted record results, building upon the success it achieved when it topped Lotus Notes in the first-calendar quarter as reported by Electronic Mail & Messaging Systems Newsletter (May 1, 1998). Additionally, Microsoft is delivering the much-anticipated final beta of SQL Server™ 7.0 to over 50,000 sites, making it one of the most broadly distributed betas ever for enterprise-class relational database management software.

“The Microsoft software platform allows customers to select from a wide choice of PC hardware and software that not only reduces ownership costs, but accelerates the realization of business value when compared with other platforms,”
said Deborah Willingham, vice president, enterprise customer unit.
“Large corporate customers continue to adopt Microsoft products because they are scalable, manageable and interoperate with the systems currently deployed.”

Microsoft also announced the continuation of its stock repurchase program for the coming fiscal year ending June 30, 1999. The company’s repurchase program provides shares for issuance to employees under the company’s stock option and stock purchase plans. Under this program in fiscal 1998, Microsoft repurchased approximately 38.8 million shares.

The number of shares to be purchased during fiscal 1999 will be based on several factors including the level of employee stock option exercises, the price of Microsoft’s stock, and market conditions. The number of shares to be repurchased may also vary from the amounts purchased in previous years. Purchases may be made in the open market or in privately negotiated transactions from time to time at management’s discretion. Microsoft also expects to continue the sale of warrants and may buy or sell other Microsoft securities in conjunction with the repurchase program, including derivative securities.

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, technological shifts; customer demand; competitive products and pricing, product mix, ship schedules, life cycles, and terms and conditions; litigation; 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, WebTV, 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

Caroline Boren, Waggener Edstrom, (425) 637-9097

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