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  • stock_fool_99 stock_fool_99 Apr 18, 2002 7:18 PM Flag

    MSFT

    By Ronna Abramson
    Staff Reporter
    04/18/2002 05:45 PM EDT

    Updated from 4:57 p.m.
    Microsoft (MSFT:Nasdaq - news - commentary - research - analysis) surprised Wall Street by missing third quarter revenue estimates and talking down guidance for the fourth quarter and fiscal 2003.

    There was confusion about the company's earnings performance as its bottom line included both gains and charges and it was unclear whether analysts' estimates incorporated them. But, after crunching the numbers, analysts said Microsoft appears to have beaten expectations.

    For the third quarter ended in March, the world's largest software maker posted net income of $2.74 billion, or 49 cents a share. That figure includes a 15-cent gain from Microsoft's $847 million sale of Internet travel service Expedia (EXPE:Nasdaq - news - commentary - research - analysis) to USA Networks (USAI:Nasdaq - news - commentary - research - analysis), and a 14-cent charge for investment write-downs.

    The Redmond, Wash., company said revenue rose 13% to $7.25 billion. A year ago the company earned 44 cents a share on revenue of $6.40 billion. Wall Street had been expecting Microsoft to earn 51 cents a share on $7.34 billion in revenue, according to Thomson Financial/First Call.

    Analysts had expected Microsoft to gain 10 cents a share from Expedia but Microsoft ended up gaining 15 cents. Charlie Di Bona, an analyst with Sanford C. Bernstein, said to compare Microsoft's numbers accurately to First Call, you must add back the 14 cents impairment and subtract the 5 cents from Expedia. That brings Microsoft's earnings to 58 cents a share -- well above Wall Street estimates. Di Bona has an outperform rating on Microsoft. "I don't think anybody knew about the impairment charge," he said.

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