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Microsoft Announces Dividend, Record Earnings

Microsoft Corp. put up another quarter of record revenues, in part based on strong growth in its server segment.

At the same time, Microsoft announced its first stock dividend, a step investors have pushed for in recent years as the days of the stock's meteoric growth have ended. The company also split its stock two for one.

Revenues amounted to $8.54 billion for the quarter ended Dec. 31, 2002, which is Microsoft's third quarter. That was a 10 percent increase over the $7.74 billion in revenues for the same period in 2001.

Net income amounted to $2.55 billion, compared to $2.28 billion in the year-ago period. That came to a diluted earnings per share of $0.47 per share.

Microsoft's brand new dividend came to $0.16 per share ($0.08 per share post-split).

"You could probably characterize our dividend as a starter dividend," Microsoft CFO John Connors said in a shareholder meeting to discuss the earnings results Thursday afternoon. "Given that we have moved forward on a number of legal issues ... we felt that we had further clarity," Connors said in explaining why a dividend is coming now. The total cost to the company of the dividend is $850 million.

"As we go forward, we'll look at what does our legal situation look like. If you stack us up against other big tech companies, we're right in the ballpark, and that's a good place to start," Connors said.

Microsoft controller Scott Boggs described the company's performance in server platforms despite the continuing flatness of IT demand as "especially satisfying."

Server revenues rose 12 percent from $1.57 billion in Q3 2001 to $1.76 billion in Q3 2002. Attributing the growth to the economy-induced shift from Unix and "Big Iron" servers to lower cost Intel-based servers, Boggs noted Windows 2000 Server, Windows 2000 Advanced Server and SQL Server 2000 as areas for strongest growth. According to Microsoft, the SQL Server business grew by 40 percent, and the company said there is especially strong demand for the Enterprise Edition of the database among government clients.

Client revenues were flat, about $10 million off the 2001 figures in a massive segment sized at about $2.5 billion. The year-ago quarter is a tough one to beat, however, as that's when Windows XP launched. Microsoft says the current ratio of Windows XP Professional sales to Windows XP Home sales is 55 percent to 45 percent.

Geographically, Microsoft saw its strongest revenue growth Europe, the Middle East and Africa, which was about 32 percent compared to the previous quarter. Sales in the Americas were fairly flat with about 3 percent growth, although sales to OEMs were up 6.6 percent.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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