MICROSOFT POSTS HIKE OF 62% IN EARNINGS; SUSTAINED GROWTH IFFY, SOFTWARE GIANT CAUTIONS.

Byline: George Tibbets Associated Press 

Microsoft Corp., buoyed by healthy sales of the latest upgrade to its Office suite of business software, reported Monday that its fourth-quarter profits rose 62 percent from a year ago.

But the company's chief financial officer warned that that rate of growth would be difficult to sustain in the coming year as personal computer sales slow, Year 2000 computer problems linger and Microsoft makes hefty investments in new arenas.

Microsoft, which dominates the personal computer software industry, had net income of $2.2 billion or 40 cents a diluted share, compared with profits of $1.36 billion or 25 cents a diluted share a year earlier. Revenue for the quarter ended June 30 was $5.76 billion, up 39 percent from $4.15 billion last year.

Analysts surveyed by First Call Corp. had predicted earnings of 36 cents a share.

Microsoft, based in suburban Redmond, released Office 2000 for sale in mid-June, although hundreds of thousands of users had been familiarizing themselves with pre-release versions of the industry-standard business software package. It also brought out a newer version of its Windows 98 operating system for personal computers.

``Continuing consumer demand for Microsoft Windows and Office drove another year of fine financial performance,'' said Greg Maffei, chief financial officer.

But, he cautioned, ``I think we are entering into a slower growth environment.''

Many companies are concentrating on preparing for the year 2000 change and could postpone making large software investments, Maffei said. Microsoft also is making large investments in research and development, and in sales and support, he said.

In just the area of cable, telephone and other communications services, Microsoft invested more than $6 billion in the past year.

``In fiscal 2000, our revenue growth rates will decline due to slowing PC demand, uncertainty surrounding Y2K and uncertain global economic conditions, and we will not see further margin expansion,'' he said.

On Friday, Microsoft became the first corporation to achieve a market capitalization of a half-trillion dollars, as anticipation of the earnings report and speculation that Microsoft might create a separate ``tracking stock'' for its Internet properties sent the share price soaring.

Microsoft did not give exact sales figures for the new version of Office. However, for the quarter, Microsoft's productivity software segment showed operating revenues of $2.93 billion, up nearly 48 percent from $2 billion for the same quarter a year ago.

For the fiscal year, Microsoft had net income of $7.79 billion or $1.42 a share on revenues of $19.75 billion, compared with profits of $4.49 billion or 84 cents a share on revenues of $15.26 billion in 1998.

The company's earnings were released after the close of the market. Shares of Microsoft were trading at $97.50 in after-hours trading, after closing the regular session at $98.375, down $1.6125, on the New York Stock Exchange.