Subject:  Microsoft earnings 'were lower after options' WORLDTRADESTOCKS.COM |
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Date Posted: 15:19:58 09/06/03 Sat
Microsoft earnings 'were lower after options'
By Richard Waters in San Francisco
Published: September 6 2003 5:00 | Last Updated: September 6 2003 5:00
Microsoft's earnings would have been nearly $2.5bn lower in its last financial year if it had deducted the costs of issuing stock options to its employees, the company revealed yesterday.
News of the expenses, which would have cut after-tax profits to $7.5bn, comes in the wake of Microsoft's decision to break ranks with other big technology companies and abandon all stock options awards from now on.
In its annual report filed yesterday, the world's biggest software company also revealed its continued heavy reliance on the Windows desktop computer operating system for its profits growth, in spite of efforts to diversify into other areas.
The company's client division, which is based largely on the personal computer operating system, generated operating profits of $8.4bn during the past 12 months, an increase of 11 per cent, while maintaining its operating profit margin of 81 per cent.
Meanwhile, Microsoft also cut the losses from some of its newer businesses, reflecting management efforts to stem the tide of red ink from ambitious spending on things such as the Xbox games system and the MSN online service.
Losses from these and other newer businesses fell to $1.63bn. The 12 per cent decline in losses was entirely due to a better performance from MSN, which slashed its losses from $641m to $299m during the year.
Last year was the first time Microsoft had shown the results of these divisions separately. That has been seen on Wall Street as evidence that the company intended to view each as a stand-alone business in its own right, making it less tolerant of losses than it has been in the past.
Of the company's other two big profit-earners, the information worker division, which is based around the Office suite of PC software applications, increased earnings by 9 per cent to $7bn, while the server unit saw profits advance by 20 per cent to nearly $2.5bn.
After deducting the effects of stock options from its profits in both periods, Microsoft's earnings last year would have been 41 per cent higher than the previous year, according to the company's annual report. That compares with the 28 per cent profit increase it had already reported, before the impact of options.
The better performance partly reflects fewer write-downs of failed investments made during the 1990s in cable and telecommunications companies. These losses were put at $1.1bn last year, compared with $4.3bn the year before.
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