Mister Softee slashes estimates as earnings season rambles on.

Microsoft

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warned after the close Thursday that first-quarter earnings and revenue would fall short of analyst expectations. The software giant, which last month fended off a government breakup plan, also beat analysts' expectations for its fiscal fourth quarter. Excluding a $2.6 billion investment loss, the company earned $2.75 billion on revenue of $6.6 billion, or 43 cents per share. A year ago, the company earned 44 cents per share on $6.1 billion in sales.

Analysts were expecting earnings of 43 cents per share on $6.5 billion in revenue. However, the company took down guidance for next quarter. It said it expects earnings of 39 cents to 40 cents for its September quarter on $6 billion to $6.2 billion in revenue. Analysts are currently expecting 45 cents in earnings on $6.3 billion in revenue, It affirmed analysts' estimates for fiscal 2002, however, projecting full-year EPS guidance of $1.91 to $1.95 per share on revenue of $28.8 billion to $29.5 billion for the year ending June 30, 2002. Analysts are expecting earnings of $1.94 per share and $28.8 billion in revenue.

The stock was off 4.5% to $68.10 in morning trading. For a closer look at Microsoft's earnings release, please read Joe Bousquin's

PC Slowdown Flattens Microsoft

Today's Earnings

Avici Systems

(AVCI)

reported a second-quarter loss, excluding charges, of $11.46 million or 23 cents a share, compared with a loss of $18.23 million, or 48 cents a share a year ago. Wall Street analysts, on average, were expecting a loss of 24 cents a share. The company said revenue for the second quarter rose almost tenfold to $21.4 million from $2.2 million in the year-ago quarter.

Citrix Systems

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said second-quarter net income rose 90%, ahead of analysts' expectations, citing improving market conditions and the launch of new products. The company reported earnings of $36.3 million or 19 cents a share, as compared to $20.8 million or 10 cents a share in the year-ago period. Analysts polled by research firm

Thomson Financial/First Call

were expecting the company to post earnings of 17 cents a share.

Ericsson

(ERICY)

reported a narrower-than-expected second-quarter loss of 5.3 billion Kronor or $493 million U.S., compared to the analysts' consensus estimate of 5.6 billion Kronor. The company said it is lowering its 2001 estimates for the mobile phones and systems markets, citing deteriorating market conditions. The company now expects growth for mobile systems to be flat to slightly positive, compared to the 5% to 15% growth it previously reported.

Merck

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reported a meager 5% rise in second-quarter profits due to weaker-than-expected sales of its Vioxx arthritis drug and the strong dollar overseas. However, it did meet lowered analysts' expectations. The company said it earned $1.82 nillion or 78 cents a share, compared with $1.72 billion or 73 cents a share in the year-ago period. Zocor, Merck's cholesterol-modifying medicine, had another strong quarter with sales totaling $1.4 billion.

On the Economic Lookout

At 2 p.m.

the Treasury Department releases the June

federal budget report. The federal budget figures are significant only to the extent that they provide clues as to whether the government will run a surplus or a deficit for the fiscal year. A shortfall occurs when the government spends more in a fiscal year than it receives in revenue. In the event of a shortfall, the government typically borrows from the public by floating long-term and short-term debt. Economists believe that enormous federal deficits lead to higher interest rates and inflation.

(

Forecasts are from

Reuters

. Times are Eastern. For a longer-term economic calendar and more, see

TSC's

Economic Databank.

)

In Overnight Activity

eBay

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reported second-quarter earnings of 12 cents per share, excluding certain non-cash charges, or 3 cents more than the consensus expected by Wall Street analysts. This compares with earnings of 5 cents a share from last year's second quarter. Revenue jumped 84% from a year ago, to $180.9 million, almost $16 million better than the consensus estimate.

In addition, the company said revenue in the second half of the year could be as much as $15 million to $30 million higher than expected, putting the second-half total at around $385 million to $400 million. Earnings will likely be a penny or two above expectations over the next two quarters, at 21 cents to 22 cents a share. The stock rose 4% to $67 this morning. For more on the eBay story, read Tim Arango's

With Strong Quarter, eBay Keeps on Rolling.

Sun Microsystems

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posted fiscal second-quarter earnings in line with Wall Street's expectations Thursday after the close. For the period ended Dec. 31, Sun said that it earned $552 million, or 16 cents a share. But the company was light on revenue. Sales totaled $5.12 billion, representing an increase of 44% from the year-ago period but falling short of the figure to which Sun had guided analysts.

Sun also lowered its guidance for 2001 sales growth. On the conference call following Sun's earnings release, chief financial officer Michael Lehman said that the company now expects sales to grow in a range between 30% and 35%. Sun's shares rose 4.7% to $15.10 this morning. Be sure to read Tom Lepri's take on Sun's earnings in

Details Scarce as Sun Stonewalls on Outlook