Microsoft Announces Record Quarterly Revenue and Income

REDMOND, Wash., Jan. 19, 1999 — Microsoft Corp. today announced net income of $1.98 billion and diluted earnings per share of $0.73 for the quarter ended Dec. 31, 1998, a 74 percent increase over the $0.42 diluted earnings per share reported for the corresponding quarter last year. Revenues totaled $4.94 billion, a 38 percent increase over the $3.59 billion during the same quarter last year.

Strong growth in PC shipments fueled broad demand for our products including Microsoft Ò Windows NT ÒServer and Windows NT Workstation, server applications, and Office 97,”
said Greg Maffei, chief financial officer.
“However, results also spiked due in part to demand caused by year 2000 concerns. We remain guarded about growth in 1999, given the likelihood that organizations will reduce their non-Y2K-related IT spending and the uncertain international economic outlook.”

“Corporate customers are choosing the Microsoft platform,”
noted Bob Muglia, senior vice president, applications and tools division at Microsoft.

Microsoft Office, SQL Server TM and Exchange all reached new highs this quarter, with shipments of all server applications nearly doubling in the past year.”

Microsoft Exchange Server set a new record, shipping 4.5 million client access licenses this quarter. The product continues to show strong revenue momentum and license growth. Through calendar year 1998, Exchange has outsold all competitors with 14.4 million seats, demonstrating its leadership in the messaging and collaboration category.

Microsoft SQL Server 7.0 was launched to over 45,000 customers in 53 countries around the world, and made a clean sweep of COMDEX awards, bringing home the
“Best of Productivity Software”
“Best of Show.”
As of the end of 1998, Microsoft is now with SQL Server the second-largest database vendor, moving up from fifth-largest in the past two years. SQL Server is also growing at nearly twice the rate of the next fastest competitor and nearly three times Oracle’s CY98 growth rate.

Strong sales of the Windows NT Server family of products (Windows NT Server; Windows NT Server, Terminal Server Edition; and Windows NT Server, Enterprise Edition) showcased customer demand for multipurpose capabilities: Network Operating System (NOS) services, Windows Ò -based terminal support and advanced application services, such as clustering and high-performance transaction processing. Microsoft Windows NT Server outshipped all other server operating systems, in terms of unit sales, for the second consecutive year, according to International Data Corp. (IDC). Microsoft Windows NT Workstation has licensed more than 25 million units, with over 3 million new users this quarter.

Microsoft announced availability of Microsoft Office 2000 beta 2 and the largest-ever early evaluation for Office. Responding to customer demand, the Office 2000 evaluation program has been expanded to an expected 700,000 customers participating in 43 countries around the world, making it 10 times larger than all previous Office evaluation programs put together.

The quarter was seasonally strong for the consumer products of Microsoft’s interactive media group, with a solid holiday quarter for games and gaming devices as well as the Encarta Ò reference line. In online businesses, the MSN TM network of Internet services now reaches more than 40 percent of Internet users in the United States, according to Media Metrix, and membership to the MSN Hotmail TM Web-based e-mail service exceeds 30 million active accounts worldwide. In July, Microsoft began to consolidate its Internet services at a single portal site – – and total reach grew at a rate of nearly 60 percent during the year. In addition, the company announced the acquisition of LinkExchange to expand MSN services to small-business customers and completed an advertising alliance with First USA Inc., valued at more than $90 million over five years.

“It’s clear that Microsoft’s success is consistent with an industrywide trend where companies both small and large are benefiting from great customer demand for innovative new technologies that are revolutionizing the way people live and work,”
said Bob Herbold, executive vice president and chief operating officer at Microsoft.
“It’s hard to think of any other industry that can boast the unprecedented growth ranging from creation of new jobs to the number of new startups to increased flow of capital investment.”

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
) 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 NT, Windows, Encarta, MSN and Hotmail are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries.

Other product 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:

Caroline Boren, 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 PST conference call with financial analysts is available at .

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