<BREAKFAST WITH THE FOOL>

Wednesday, April 21, 1999

"Large increases in cost with questionable increases in performance can be tolerated only for race horses and fancy women." -- William Thomson, Lord Kelvin

Latest Market Numbers

Microsoft Beats Forecasts

Computer software giant Microsoft (Nasdaq: MSFT) posted better-than-expected fiscal third-quarter earnings of $1.92 billion, or $0.35 a share, a 40% increase over the split-adjusted $0.25 it earned in the same year-earlier quarter. Analysts had projected EPS of $0.32. Quarterly revenues of $4.33 billion represented a 15% rise over last year's $3.77 billion. The company's net profit margin, already the highest among Fortune 500 companies, increased further, to 44% from 40.2% in the previous quarter.

Microsoft said it had "solid performance" across all of its product lines but especially Windows NT, Office, and server applications. But despite a 22% improvement in revenues in Asia during the quarter year-over-year, Microsoft remains "guarded" about growth this year given that companies will probably lock down their systems infrastructures on account of the Year 2000 problem. Still, CFO Greg Maffei predicted that PC unit shipments will grow by 16% to 17% this year. "We're not seeing a meltdown in PC demand," he said.

Maffei said the company expects fiscal fourth-quarter revenue to increase by $500 million compared with this quarter, as the English version of Office 2000 becomes available on store shelves in the U.S. on June 10, 1999.

News to Go

The world's largest PC maker Compaq Computer (NYSE: CPQ) reported first-quarter earnings of $0.16 a share, slightly better than its own diminished forecast and analysts' reduced estimates of $0.15. The official results came in the wake of the forced resignation of its CEO Eckhard Pfeiffer after the company warned that Q1 earnings would come in at less than half of analysts' estimates then of $0.31.

AT&T (NYSE: T) plans to offer local residential service in New York by the end of the year by leasing Bell Atlantic's (NYSE: BEL) phone network, The Wall Street Journal reported. AT&T executives have said it will take the company through 2000 to outfit all its cable lines for two-way telephone service, which requires advanced technical upgrades.

Paging services company SkyTel Communications (Nasdaq: SKYT) said it has hired a financial adviser to help the company explore "strategic alternatives."

Earnings to Go:

Boston Scientific (NYSE: BSX) -- Q1 EPS: $0.25 vs. $0.15 last year; estimate: $0.21
Champion Enterprises (NYSE: CHB) -- Q1 EPS: $0.43 vs. $0.36 last year; estimate: $0.40
Coca-Cola (NYSE: KO) -- Q1 EPS: $0.30 vs. $0.34 last year; estimate: $0.29
Colgate-Palmolive (NYSE: CL) -- Q1 EPS: $0.65 vs. $0.60 last year; estimate: $0.64
Duke Energy (NYSE: DUK) -- Q1 EPS: $0.83 vs. $0.89 last year; estimate: $0.89
DuPont Photomasks (Nasdaq: DPMI) -- fiscal Q3 EPS: $0.28 vs. $0.50 last year; estimate: $0.22
Encad Inc. (Nasdaq: ENCD) -- Q1 EPS: profit of $0.03 vs. loss of $0.06 last year; estimate: loss of $0.05
Ingersoll-Rand (NYSE: IR) -- Q1 EPS: $0.73 vs. $0.60 last year; estimate: $0.68
IT Group (NYSE: ITX) -- Q1 EPS: $0.17 vs. $0.07 last year; estimate: $0.16 (one analyst)
Kaiser Aluminum Corp. (NYSE: KLU) -- Q1 EPS: loss of $0.48 vs. $0.15 last year; estimate: loss of $0.27
Kimberly-Clark (NYSE: KMB) -- Q1 EPS: $0.72 (excluding gain) vs. $0.56 last year; estimate: $0.65
Musicland Stores (NYSE: MLG) -- Q1 EPS: profit of $0.04 vs. loss of $0.11; estimate: loss of $0.04
Nabisco Holdings (NYSE: NA) -- Q1 EPS: $0.17 (before one-time items) vs. $0.16 last year; estimate: $0.17
Nautica Enterprises (Nasdaq: NAUT) -- fiscal Q4 EPS: $0.25 vs. $0.33 last year; estimate: $0.24
Qualcomm (Nasdaq: QCOM) -- fiscal Q2 EPS: $0.82 (before charges) vs. $0.25 last year; estimate: $0.59
Qwest Communications International (Nasdaq: QWST) -- Q1 EPS: profit of $0.01 vs. loss of $0.06 last year (pro forma); estimate: breakeven
RealNetworks (Nasdaq: RNWK) -- Q1 EPS: loss of $0.02 vs. loss of $0.07 last year; estimate: loss of $0.03
Xoom.com (Nasdaq: XMCM) -- Q1 EPS: loss of $0.24 vs. loss of $0.29 last year; estimate: loss of $0.26

More Foolishness

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor