What goes up...
Software giant Microsoft may see its operating margins next year may decrease, according to a filing with the SEC.
Sales growth in the first two quarters of 1997 may not approach the rate attained in 1996, which in large part was driven by Windows 95 sales, the filing stated. The company also said its operating expenses are expected to increase in 1997, which coupled with slower revenue growth could squeeze its profit margins.
"We generally take a fairly conservative view of things in our financial filings," said a Microsoft spokesperson. "We're optimistic about a number of things in the coming year, like Office 97, Windows NT, and other Windows products."
The statement doesn't come as much of a surprise to financial analysts. Most companies, even Microsoft, would have a hard time following up the sizeable increase in revenues it enjoyed this year.
"The language [in the SEC filing] is consistent with our forecasts," said Dave Readerman, software analyst for Montgomery Securities. He is predicting revenue growth will reach 16 percent in fiscal 1997, compared to a growth rate of 54 percent last year.
"We think the NT business as well as Office 97 upgrade will contribute to growth. There is no real change to our earnings estimates [because of the report]," Readerman said. The forecast for earnings is $4.05 a share, which is up from $3.46 per share the previous year, he noted.
For the quarter ending June 30, the company reported $2.26 billion in revenue, a 39 percent increase in revenues over the corresponding quarter. Net income rose 50 percent to $559 million, or 87 cents per share, compared with the same quarter last year.
Microsoft shares traded at 133-1/8, down 1-1/4, in after-hours trading.