Security woes hit Microsoft balance sheet

Friday, 24 October 2003, 11:23 AM EST

The Redmond, Wash.-based software giant said late Thursday that companies were reluctant to sign new long-term contracts in the most recent quarter amid concern over the MSBlast worm and other security issues. The result was a sharp drop in unearned revenue--that is, money taken in by Microsoft for software deals that span future quarters.

News of the drop overshadowed better-than-expected results for the current quarter, sending Microsoft shares lower in after-hours trading. Shares were trading at $27.64 Thursday afternoon, down $1.27, or more than 4 percent, from Thursday's closing price of $28.91.

Matt Rosoff, an analyst with market researcher Directions on Microsoft, said that some drop in unearned revenue was expected, given that a year ago many companies were signing deals ahead of a Microsoft-imposed deadline. However, the decline--more than $700 million--was more severe than expected.

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