Microsoft Beats Estimates

By Paul Shread

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Microsoft beat estimates and raised guidance after the close on Thursday, but traders nonetheless were disappointed in the results.

Earnings of 30 cents a share beat estimates by a penny, and revenues of $8.22 billion topped $8.09 forecasts. The company's December quarter guidance of 29-30 cents exceeded analysts' 28-cent estimates, and revenue guidance of $9.7-9.8 billion was well above $9.28 billion forecasts. Fiscal 2004 guidance of $1.10-1.12 was at the low end of $1.12 estimates, but revenue guidance of $34.8-35.3 billion was above $34.756 billion estimates.

MSFT fell 4% after hours on a big drop in deferred revenues - revenues not yet recognized because the work hasn't been completed or delivered yet - that suggested weakness in corporate spending.

"While corporate IT spending was slow to improve this quarter, we saw strength across all of our consumer businesses, driving higher than expected revenue for the company," CFO John Connors said in a statement.

Also after the close, VeriSign , Durgstore.com , Applied Micro , Business Objects , Digital Insight , Western Digital and TriQuint beat estimates. Emulex , Nortel , Gateway , Scientific Atlanta UTStarcom and JDS Uniphase offered mixed results and guidance.

Tech stocks fell during the day on warnings from KLA-Tencor , Macromedia , Computer Associates , and Mercury Interactive .

The Nasdaq fell 12 to 1885, the S&P 500 rose 3 to 1033, and the Dow added 14 to 9613. Volume declined to 1.6 billion shares on the NYSE, but rose to 1.94 billion on the Nasdaq. Decliners led 16-15 on the NYSE, and 18-13 on the Nasdaq. Downside volume was 48% on the NYSE, and 67% on the Nasdaq. New highs-new lows were 115-11 on the NYSE, and 119-11 on the Nasdaq.

As usually, investor reactions to earnings ran the gamut.

Veritas was a bright spot, gaining 5% after beating and raising estimates.

Also rising on earnings were Symantec , Corning , AskJeeves , Foundry , Cirrus , Roxio , and eResearch .

Most companies reporting appeared to bet met by selling. PeopleSoft , Network Associates , Flextronics , SafeNet , Ariba , LSI , SunGard , Citrix , Intersil , Tekelec , Digital River , Cabot Micro and Open Text all fell on their results.

Rainbow rose on its plans to merge with SafeNet.

Sprint rose on cost-cutting plans.

Qwest and AT&T declined on legal troubles.

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