MICROSOFT may be rapidly transforming itself to meet the challenge of the Internet marketplace, but the software giant remains dedicated to its core businesses of Windows, Office and server software.
That was the message company Chairman Mr Bill Gates and other executives left with financial analysts on Wednesday in a day long annual briefing that featured virtually the entire top management team, as well as an impromptu visit to an aircraft carrier prompted by a bomb scare at their waterfront meeting place.
As usual, Microsoft deployed a good cop, bad cop approach at the meeting, with executive vice president Mr Steve Ballmer playing the heavy, warning of tough competition and potential pitfalls over the next year.
Several veterans of the annual event said they heard little new in Ballmer's cautionary remarks that would cause them to change their view of the company's prospects.
"I think we heard characteristically cautious comments consistent with past annual meetings - about the last 10 annual meetings," said analyst Mr Rick Sherlund of Goldman Sachs. "There were no surprises."
As Microsoft chief financial officer Mike Brown pointed out, the Redmond, Washington based company has had 21 consecutive years of rising earnings and revenues, and analysts expect the fiscal year that began on July 1st to be no different.
Mr Sherlund sees net income rising to $2.65 billion (£1.614 billion) on revenues of $10.2 billion, up about 20 per cent from the $2.2 billion and $8.67 billion reported for the year just ended.
He and other analysts said Mr Ballmer's list of concerns was legitimate, including aggressive competition, declining growth in personal computer sales and what he called a "big hole" to fill after the past year's Windows 95 upgrade cycle.
Indeed, analysts did not believe Microsoft could repeat its 46 percent revenue growth rate this year, and they agreed Microsoft faced competition, especially, from Canacfa's Corel Corp and Internet upstart Netscape Communications Corp, among others.
But they noted that Mr Gates and others predicted the forthcoming release of Windows 97 would spur the biggest upgrade cycle ever for the key Windows product, and they said the company had moved quickly to catch up in the Internet arena and was delivering software to take advantage of the elusive market of big corporate users.
"Ballmer is always paranoid - that's what makes this such a good company," said Mr Scott McAdams of brokerage Ragen MacKenzie. "I can't think of another company that stands up and says what's wrong with their business."
Specifically Mr Ballmer warned that PC sales growth could slow dramatically from the 20 per cent rate of the past 12 months. And looking for the cloud behind any silver lining, he noted that the fastest growth would be in areas with high software piracy rates such as the Far Fast.
