<BREAKFAST WITH THE FOOL>
Wednesday, January 20, 1999
"Forgive your enemies, but never forget their names." -- John F. Kennedy
Amazing Q2 at Microsoft
Thanks to strong growth in PC shipments and concerns about the Year 2000 problem, Microsoft Corp. (Nasdaq: MSFT) late yesterday reported fiscal second quarter earnings of $0.73 a share -- an astounding 74% (seventy-four percent!) gain from the $0.42 it earned in the same period last year. That crushed the First Call analysts' mean EPS estimate of $0.59, making it the fifth straight quarter that the software giant has topped Wall Street forecasts. Total income during the quarter came to $1.98 billion as revenues surged 38% to $4.94 billion.
Still, Microsoft CFO Greg Maffei said the company remains "guarded" about growth in 1999 as organizations likely will cut their non-Y2K-related information technology spending and as the international economic outlook remains uncertain. During the company's conference call with analysts and investors, Maffei projected that fiscal Q3 revenues will drop by about $300 million from the second quarter. But that would still be a 25% increase over the year-earlier quarter. Maffei added that analysts' Q3 EPS forecasts are $0.02 to $0.03 too low -- analysts were estimating $0.60, up from last year's $0.50 -- and that Q4 projections are $0.01 to $0.02 too low.
Microsoft's net profit margin, already the highest of any major company, rose to 40.2% from 38.5% in the preceding quarter. Meanwhile, the company's stash of cash, also the highest among companies, climbed to $19.3 billion from $17.2 billion. In advance of the earnings release yesterday, Microsoft shares jumped $5 7/8 -- about 4% -- to close at $155 5/8. Following the announcement, the shares traded as high as $164 7/8 in after-hours trading. At this rate, Microsoft Chairman and CEO Bill Gates, who owns a 20.8% stake in the company, is closing in on becoming the world's first $100 billion man.
A replay of the conference call is available on Microsoft's investor relations website through the close of business Thursday, January 21.
News to Go
The man most responsible for the state of the union's economy, Federal Reserve Chairman Alan Greenspan, heads to Capitol Hill this morning to testify before the House Ways and Means Committee. Fed watchers expect Greenspan won't say anything that would change monetary policy in the near term.
President Clinton announced during his State of the Union address last night that the Justice Department intends to sue tobacco companies to recover the roughly $20 billion in costs the federal government has incurred while treating smoking-related illnesses. But according to The Wall Street Journal, basic decisions about the suit have yet to be made, including who would be sued, when, and the specific grounds for legal action.
Earnings Announcements Galore:
AlliedSignal Inc. (NYSE: ALD) -- Q4 EPS: $0.62 vs. $0.54 last year; estimate: $0.62
Ascend Communications (Nasdaq: ASND) -- Q4 EPS: $0.31 (before charges) vs. $0.24 last year; estimate: $0.31
Avant! Corp. (Nasdaq: AVNT) -- Q4 EPS: $0.40 (before charges) vs. $0.24 last year; estimate: $0.39
Check Point Software Technologies (Nasdaq: CHKPF) -- Q4 EPS: $0.47 vs. $0.36 last year; estimate: $0.47
Computer Associates International (NYSE: CA) -- fiscal Q3 EPS: $0.64 vs. $0.60 last year; estimate: $0.61
Compuware Corp. (Nasdaq: CPWR) -- fiscal Q3 EPS: $0.49 (before charges) vs. $0.29 last year; estimate: $0.45
Data General (NYSE: DGN) -- fiscal Q1 EPS: $0.07 (before gains) vs. $0.07 last year; estimate: $0.05
DoubleClick Inc. (Nasdaq: DCLK) -- Q4 EPS: loss of $0.25 vs. loss of $0.33 last year; estimate: loss of $0.26
Duke Energy (NYSE: DUK) -- Q4 EPS: $0.60 vs. $0.41 last year; estimate: $0.66
FORE Systems (Nasdaq: FORE) -- fiscal Q3 EPS: $0.10 vs. $0.10 last year; estimate: $0.10
General Electric (NYSE: GE) -- Q4 EPS: $0.80 vs. $0.70 last year; estimate: $0.80
Harley-Davidson (NYSE: HDI) -- Q4 EPS: $0.39 vs. $0.28 last year; estimate: $0.36
Hertz Corp. (NYSE: HRZ) -- Q4 EPS: $0.44 vs. $0.32 last year; estimate: $0.36
Innovex Inc. (Nasdaq: INVX) -- fiscal Q1 EPS: $0.20 vs. $0.48 last year; estimate: $0.18
Knight/Trimark Group (Nasdaq: NITE) -- Q4 EPS: $0.33 vs. $0.18 last year; estimate: $0.26
Level One Communications (Nasdaq: LEVL) -- Q4 EPS: $0.28 (pro forma) vs. $0.19 last year; estimate: $0.24
Plexus Corp. (Nasdaq: PLXS) -- fiscal Q1 EPS: $0.36 vs. $0.23 last year; estimate: $0.34
Qualcomm Inc. (Nasdaq: QCOM) -- fiscal Q1 EPS: $0.65 vs. $0.50 last year; estimate: $0.60
Quickturn Design Systems (Nasdaq: QKTN) -- Q4 EPS: $0.06 (before tax benefit) vs. $0.19 last year; estimate: $0.03
Sanmina Corp. (Nasdaq: SANM) -- fiscal Q1 EPS: $0.45 (before charges) vs. $0.33 last year; estimate: $0.44
Spyglass Inc. (Nasdaq: SPYG) -- fiscal Q1 EPS: loss of $0.15 vs. loss of $0.28 last year; estimate: loss of $0.15
Teradyne Inc. (NYSE: TER) -- Q4 EPS: $0.14 vs. $0.54 last year; estimate: $0.12
Texas Instrument (NYSE: TXN) -- Q4 EPS: $0.59 (before charges) vs. $0.55 last year; estimate: $0.54
Xilinx Inc. (Nasdaq: XLNX) -- fiscal Q3 EPS: $0.46 vs. $0.37 last year; estimate: $0.40
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