Microsoft sees sales hurdles ahead

Microsoft sounded a cautionary note with financial analysts on Wednesday, warning that it faces challenges to keep growing its sales at the same rate it has in recent years.

In a presentation with financial analysts in New York, Microsoft Chief Financial Officer John Connors said that revenue growth in the next fiscal year will likely not match that of recent years. However, Connors said that an increased focus on costs should enable the company to increase its profits beyond the rate at which sales grow. "We do see IT spending increasing somewhat. However, we don't expect it to be what it was in the '90s," Connors said.

The company also faces a further drop in its closely watched balance of "unearned revenue"--that is, money taken in for software provided over several years as part of a licensing agreement. Microsoft reported a higher-than-expected dip in such revenue--for the second quarter in a row--when it posted earnings last week. The software giant is largely blaming the dip on the ending of one of its volume licensing programs, known as Upgrade Assurance. That program accounted for $1.1 billion of the $9 billion in unearned revenue that the company had on its books at the start of its current fiscal year. However, nearly all that amount will be booked as revenue over the current year.

News source: C|Net

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