Microsoft Results Cheer Wall Street

Microsoft, the world's software company used as the barometer for the depressed software sector, appeared to offer some relief to a depressed Wall Street last night after reporting a relatively strong set of sales in the fourth quarter.

Releasing its 2002 results after the stock exchange closed night, Microsoft beat the expectations of analysts in contrast to Intel, the chip maker, which disappointed the street earlier in the week. Even so, Microsoft was still said to be feeling the impact of slowing demand for PCs.

The Microsoft figures came during a busy day for corporate results and after the Dow Jones industrial index staged a sudden fall late in the trading session to end 132 points lower at 8409.

Analysts said they were looking for an indication from Microsoft about its expectations for the coming months. John Connors, chief financial officer, admitted that the "current environment remains challenging" but insisted that the company was well positioned for the difficulties ahead.

However, there was some initial confusion about the group's results because of a tax charge which analysts said made comparisons with previous quarters more difficult. Microsoft reported a net income of $1.53bn for the fourth quarter to the end of June compared with net income of $65m a year earlier.

In terms of the earning per share measure preferred by Wall Street, this translated into a 28 cents a share, including an after-tax change for investment impairments of 15 cents a share in the fourth quarter 2002 compared with 1 cent a year earlier.

For the coming year, Microsoft slightly revised down its forecasts of its own performance, saying it expect to earn $1.85 to $1.91 a share in comparison with $1.89 to $1.92.

In contrast to many US companies, Microsoft has been accused of understating its quarterly income. In June, the company settled such allegations with the US regulator, the SEC, that it was misstating its earning in parts of the 1990s.

The company relies heavily on the sale of PCs because it generates around 50% of its income from its Office and Windows software. It also makes the Xbox game console, which has been subject to lower sales. It had already reduced Wall Street's expectations of its sales of the Xbox from up to 6m to between 3.5m to 4m units and yesterday said it had achieved sales of 3.9m.

Mr Connors said he was "very pleased" that the quarter as a whole had produced revenues higher than had been expected.

Analysts said the latest figures from Microsoft, which had been embroiled in landmark anti-competition case with US regulators, appeared to showed it was out performing its peers.

Its shares, which had fallen during the trading day, rose in after-hours trading.

Another technology-related company, Sun Microsystems, also reported last night, and while it produced its first quarterly profit in year it forecast it would soon make losses again. Sun Microsystems makes the computers that manage networks and has been cutting its prices to try to maintain its market share.