Microsoft issues profit warning

Microsoft has become the latest company to suffer from the downturn in the US consumer desktop sector, issuing a profit warning for its second quarter, and said it will not see an upturn for the rest of its fiscal year.

The software giant blamed the shortfall on the sluggish desktop applications market in the US consumer and corporate sectors, as well weak revenue from MSN subscriptions and online ad sales. Microsoft said its enterprise business does not appear to be affected to the same degree.

For its second quarter ending 31 December, revenue is now expected to be between $6.4bn and $6.5bn, and diluted earnings per share (EPS) will be either 46 or 47 cents.

Wall Street analysts had expected Microsoft to post EPS of 49 cents, and the latest estimates are five to six per cent below the company's own expectations for both EPS and revenue.

John Connors, Microsoft chief financial officer, said: "We believe, like many other technology companies, that the current weakness in worldwide economic conditions is resulting in a slowdown in PC sales, corporate IT spending, and consumer online services and advertising."

The Redmond giant has also revised its outlook for its fiscal 2001. It has lowered revenue projections by five per cent to between $25.2bn and $25.4bn, while diluted EPS is expected to be between $1.80 and $1.82.

Despite the tough market conditions - which have already prompted Intel, AMD, Gateway and Apple to lower their end-of-year expectations - Microsoft said it remains positive about the long-term outlook of the IT market and the PC industry.

The company is expected to release its second quarter results on 18 January.