Microsoft hides profit slide

A headline increase in profit concealed a 13 per cent slide in operating profit for Microsoft's fourth quarter ended June 30.

A headline increase in profit concealed a 13 per cent slide in operating profit for Microsoft's fourth quarter ended 30 June.

This is the second consecutive quarter that Microsoft has not been able to announce the phenomenal growth that it is used to. But Steve Ballmer, chief executive of Microsoft, has long been warning of slow demand for Windows 2000.

The market is also waiting for the release of the 2000 generation of server products.

The company reported a 10 per cent rise in profit before tax from $3.4bn (£2.2bn) to $3.6bn from the same quarter last year. Turnover rose from $3.8bn to $3.9bn.

However, the gains in profit were driven by a rise in non-operating investment income, which rose to $1.1bn, compared with only $485m for the same period last year. Before these one-off gains, Microsoft posted a 13 per cent fall in pre-tax operating income to $2.5bn.

John Conners, chief financial officer at Microsoft, said that earnings from this source would fall sharply in its third quarter, but given the company's high levels of equity investments, it was likely to remain a significant source of profit. Conners said the manufacturer remained "guarded in the short term about business PC growth rates".

Computer Associates (CA) saw its profit fall by 69 per cent for its first quarter ended 30 June, to $84m before one-off costs. Turnover improved slightly to $1.28bn from $1.22bn last year.

Sanjay Kumar, CA's president, blamed poor sales of mainframe software for the Q1 decline. CA also wrote off $31m related to the collapse of US reseller Inacom.

Thin-client software developer Citrix saw its second quarter profit fall to $20.8m, compared with $30.2m for the same quarter last year.