Feeds

Microsoft records first ever revenue drop

Netbooks a mixed blessing

Designing a Defense for Mobile Applications

Microsoft's reported its first ever drop in year-on-year revenue thanks to a combination of deteriorating PC sales and increased uptake of cheap netbooks.

Revenue for its third fiscal quarter fell six per cent to $13.65bn, the company said Thursday, while net income plummeted 32 per cent to $2.98 bn. Earnings per share dropped 30 per cent to $0.33.

Microsoft's client business took its biggest hit of all the groups - server and tools saw the only growth - with revenue dropping 16 per cent to $3.4bn and operating income dropping 19 per cent to $2.5bn. Revenue from OEMs fell 14 per cent as companies steered away from pricier versions of Windows Vista and shipped the growing netbook category of PCs with cheap versions of Windows XP. Netbooks remained at 10 per cent of total PC shipments for the quarter, while sales of non-netbook PCs fell between 15 and 17 per cent.

And while Microsoft was not predicting a recovery this calendar year, it insisted that a planned wave of software updates would help Microsoft "out perform" once the economy does rebound. Microsoft doesn't see business improving until at least the start of 2010, which covers the end of its fiscal 2009 and the start of fiscal 2010.

Chief financial officer Chris Liddell told Wall St during a conference call it's "absolutely the right thing" to release Windows 7, Office 2010, and the Azure Services Platform during the next 12 months even though Microsoft expects demand will - initially - be soft.

"Once we start to get economic pick up, we think we will out perform that economic pick up. We will be going into that growth pick up with a very, very good set of products," Liddlel said.

Liddell has little option but to say this as delivery dates were locked in a while back. As for helping turbo-charge Microsoft's recovery based on best of breed, Microsoft also believed Windows Vista would work some magic on the numbers in 2006 and 2007. Only quarterly and annual sales were broadly in line with any other Microsoft year.

It'll also be difficult to see why customers and OEMs who've had a taste of cheap and perfectly functional netbooks in the lean times should want to then pay more for a fatter PC running a more expensive operating system that does more or less the same thing.

Unless, of course, Microsoft forces the market into accepting a cut-down version of Windows for netbooks, thereby forcing customers on to more expensive machines.

Which it's trying to do. The Windows 7 Starter edition planned for netbooks will only run three applications simultaneously and will not include Windows Media Center, the Aero interface, or the ability to create multiple networks. Microsoft said it believes users will want this on a notebook running Windows 7 Home Premium.

Liddell, meanwhile, added that Windows Azure would help change Microsoft's business model in 2011 and 2012, as it delivered online versions of its products. He didn't name names, but an online version of Office is coming called Office Web applications. ®

The smart choice: opportunity from uncertainty

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Airbus promises Wi-Fi – yay – and 3D movies (meh) in new A330
If the person in front reclines their seat, this could get interesting
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
prev story

Whitepapers

Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.