Microsoft expected to show impact of US slowdown

Analysts are predicting that a slowdown in the US economy will be reflected in pedestrian third quarter results when Microsoft reports next week.

They're predicting a rise in in sales to £4.2bn from £3.9bn on the back of solid growth from Windows 2000 and higher investment income.

Investors have been anxious over Microsoft's long-running monopoly dispute with the US government, but believe George W Bush's administration will adopt a conciliatory approach.

Ulric Weil - an analyst with Friedman, Billings, Ramsey - says: "Microsoft is slowly, but visibly, improving fundamentals, and the positive interpretation of the February Appeals Court hearings are beginning to restore investors' faith."

New products unveiled by the company include the communication programme Hailstorm and the next generation of Windows and Office, called XP, which will be released later this year.

Microsoft's acquisition of Great Plains Software earlier this month is not expected to significantly dent its third-quarter results.

Wit SoundView analyst Mark Specker says: "During Microsoft's pre-announce guidance, Microsoft's conservative management lowered the financial bar sufficiently enough that we believe that they will be able to deliver an in-line quarter."

Analysts are also keen to hear news on Brad Chase, a Microsoft senior vice-president who resigned from his position last week.

Mr Chase headed Microsoft's MSN internet businesses, and it is not currently clear whether he intends to remain at Microsoft or seek opportunities outside the company.