Awesome PC Demand Drives Outstanding Microsoft Quarterly Results

REDMOND, Wash., Oct. 19, 1999 — Microsoft Corp. today announced net income of $2.19 billion and diluted earnings per share of $0.40 for the quarter ended September 30th. Revenue totaled $5.38 billion, a 28 percent increase over the $4.19 billion for the comparable quarter last year.

This quarter’s results include a gain of $156 million on the sale of the entertainment city guide portion of the MSN TM Sidewalk® online guide, while last year’s results include a gain of $160 million on the sale of the Softimage subsidiary. Excluding the sale of these businesses, net income rose 37 percent and earnings per share grew 36 percent to $0.38, from $0.28. Including the gains, earnings per share grew 29 percent.

“We had a really big quarter driven by strong corporate demand for Office 2000, Windows NT® Server and BackOffice® applications,”
said Greg Maffei, chief financial officer.
“It does not appear that Y2K had a significant impact on results. During the quarter, we also saw excellent PC unit growth, particularly in Asia, and we expect that trend to continue in the December quarter.”

During the quarter, Microsoft announced Windows® Distributed interNet Applications (Windows DNA) 2000, a comprehensive platform for building a new generation of Web-enabled applications and e-commerce solutions. “Windows DNA 2000 lays the foundation for a new era of Web development and provides customers with a state-of-the-art platform for rolling out the next wave of Internet-based Web services,” said Paul Maritz, group vice president for the Developer Group. With the Windows 2000 operating system as the cornerstone, Windows DNA 2000 incorporates new versions of existing Windows DNA components like Microsoft SQL Server TM , Microsoft Visual Studio® development system and Microsoft Commerce Server. In addition, new building blocks such as Microsoft BizTalk Server and Microsoft AppCenter Server enable XML-based business process integration and scalable server farm management.

In September, Microsoft introduced the Everyday Web, its vision for making the Internet an indispensable part of peoples’ lives – accessible any time, any place, and from any device. As part of this vision, Microsoft launched a new version of TM Search that combines the ease of use of directories, the depth offered by text-based searching, and a software architecture that enables users to find the information they need faster. Also announced was Microsoft bCentral, a new portal addressing the specific needs of small businesses to get started on the Web, to promote and market their business to online customers, and manage their business more effectively. Both Search and Microsoft bCentral are accessible through the family of sites, which has more than 30 million unique visitors a month, according to August 1999 figures from Media Metrix.

The CarPoint TM online automotive service announced its intention to create a joint venture with car manufacturers led by Ford Motor Co. to create a simpler, better way for consumers to design and order the car they want. The new venture will develop the automotive industry’s first build-to-order car-buying system, scheduled to debut early in 2000.

The second release candidate for the Microsoft Windows 2000 family of products was made available to nearly three-quarters of a million beta testers and corporate customers worldwide, marking the next step in the largest test environment in the history of Windows software development. To date more than 2,500 independent software vendors (ISVs) are participating in the MSDN TM Windows 2000 Readiness Program, and over 1,000 ISVs already have products ready for Windows 2000. Windows 2000 Professional, Server, and Advanced Server are expected to release to manufacturing by the end of calendar 1999.

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; product ship schedules; life cycles; the impact that year 2000 issues may have on demand for Microsoft’s products and services; 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, MSN, Sidewalk, Windows NT, BackOffice, Windows, Visual Studio,, CarPoint, and MSDN are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries. Other products and company names mentioned herein may be trademarks of their respective owners.

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. PDT conference call with financial analysts is available at .

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