Microsoft Announces Record Quarterly Revenue and Income

REDMOND, Wash., Jan. 18, 2001 — Microsoft Corp. today announced record revenue of $6.59 billion for the quarter ended Dec. 31, 2000, an 8 percent increase over the $6.11 billion for the same quarter last year. Net income and diluted earnings per share were $2.62 billion and $0.47.

“Strong customer demand for Windows® 2000 Professional, Windows 2000 Server, and our family of .NET Enterprise Servers drove the quarter’s record results. We made outstanding progress against our competitors in building mission-critical business solutions for large enterprises,”
said John Connors, chief financial officer at Microsoft.
“While we are enthusiastic about the break-through products and services the company will be delivering in 2001, we remain guarded about the near-term economic outlook and its impact on PC demand and technology spending.”

Sales of the Windows family of operating systems reached record levels in the quarter, driven primarily by strong performances from Windows 2000 Professional and Windows 2000 Server. BP Amoco plc, Danish pharmaceutical manufacturer Novo Nordisk, and the US Army Medical Command are among the many recent examples of a broad range of customers who are aggressively deploying Windows 2000 Professional as the standard client operating system within their organizations.

The deployment of mission-critical solutions built using Microsoft® server products such as Windows 2000 Server, Windows 2000 Advanced Server and Microsoft SQL Server™
2000 continued to accelerate during the quarter. A wide range of customers, including Chase Manhattan, Nationwide Insurance, Commonwealth Securities and Cinergy are using components of the Microsoft .NET platform to build state-of-the-art enterprise and Internet-based commercial applications.

“Customers building mission-critical applications want a robust, scalable, end-to-end infrastructure solution that delivers business efficiencies and superior performance without breaking the bank. They want to be able to integrate applications and business processes using the Internet, XML and open standards,”
said Paul Flessner, senior vice president of .NET Enterprise Servers at Microsoft.
“The .NET Enterprise Server family of products offers a comprehensive set of solutions to meet those customer needs. With the recent release of BizTalk™ Server 2000, and the ongoing success of products like SQL Server 2000 and Exchange 2000 Server, customers are clearly convinced about the benefits of our unique approach.”

On Dec. 21, 2000, Microsoft announced an agreement to acquire Great Plains Software Incorporated, a leading supplier of mid-market business applications. This acquisition presents a unique opportunity to deliver integrated, extensible business management applications and services that small and medium companies need to succeed in an increasingly interconnected economy. In addition, it will provide new capabilities to complement bCentral™
, Microsoft’s small business portal. The acquisition is expected to close by the end of the fiscal year.

At 2001 International CES, Microsoft gave audiences a first look at the much anticipated Xbox™ video game console. With the support of the industry’s top game developers and more than three times the graphics performance of the newest generation of game consoles, Xbox expects to set a new standard in gaming. Also, Microsoft announced the availability of the UltimateTV® Service, the first and only service that integrates DIRECTV™
programming, dual-tuner digital video recording, live TV controls, interactive television and Internet access in one package.

Business Outlook

Management offers the following guidance for the quarter ending March 31, 2001:

  • Revenue is expected to be in the range of $6.3 billion to $6.4 billion.

  • Diluted earnings per share is expected to be $0.42 or $0.43.

Management reiterates the following guidance for the full fiscal year ending June 30, 2001:

  • Revenue is expected to be in the range of $25.2 billion to $25.4 billion.

  • Diluted earnings per share is expected to be in the range of $1.80 to $1.82.

This press release contains statements that are forward-looking. These statements are based on current expectations that are based on assumptions that are subject to risks and uncertainties. Actual results will vary because of variations between these assumptions and actual performance in areas such as: general economic conditions; changes in the rate of PC shipments; technological shifts; customer demand; market acceptance of new products and services; competitive products, services and pricing; changes in product and service mix; delay in product ship schedules; product life cycles; currency fluctuations; sale terms and conditions; equity investment volatility; litigation; the impact of FAS 133 regarding the accounting for derivative and hedging activities, and other factors discussed in the company’s Form 10-K and other SEC filings. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after Dec. 31, 2000.

Conference Call Details

Microsoft will hold an audio webcast at 2:30 p.m. PST (5:30 p.m. EST) today with John Connors to discuss additional details regarding the company’s performance for the quarter and other forward-looking information. The session may be accessed at http://www.microsoft.com/msft/ . The webcast will be available for replay through the close of business on Friday, Jan. 26, 2001.

Founded in 1975, Microsoft (Nasdaq
“MSFT”
) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software — any time, any place and on any device.

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Microsoft, Windows, BizTalk, bCentral, Xbox and UltimateTV are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries.

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

For more information, financial analysts only:

Carla Lewis, senior director, Investor Relations (425) 936-3703

For more information, press only:

Caroline Boren, Waggener Edstrom, (425) 637-9097, carolineb@wagged.com
Katy Fonner, Waggener Edstrom, (503) 443-7000, kfonner@wagged.com

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

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