Feeds

Windows 7 misses Microsoft's summit of success

Beware the false bottom

The Power of One Brief: Top reasons to choose HP BladeSystem

Microsoft has reversed the blow to its business wrought by the recessionary end of 2008, announcing second-quarter results more in-line with its standard performance.

On Thursday, the company boasted the demand for Windows 7, launched in October, had propelled it towards record second-quarter revenue and profit. The comparable period a year ago was a miserable and painful experience that saw Microsoft miss analyst expectations and cut 5,000 staff

But contrary to what Microsoft believes, Windows 7 had very little to do with anybody rushing out to buy new PCs in the last three months of 2009. The bet you can say is that consumers - the engine for PC sales, with businesses still not buying - bought $500m worth of boxed copies of Windows 7.

For its fiscal second-quarter of 2009, Microsoft reported a 59 per cent increase in income to $6.6bn and an 18 per cent jump in revenue to $19bn. Earnings per diluted share were $0.75, up from $0.47. The Windows and Windows Live division, home to Windows 7, saw an increase in income of 98 per cent to $5.3bn on revenue that also grew 69 per cent to $6.9bn.

Now the context.

These numbers compare to the same period in 2008 when overall income dropped 11.3 per cent as revenue fell 1.6 per cent. Zeroing in on the Windows business, income from sales of Windows fell 12 per cent in Q4 2008 while revenue dropped eight per cent.

The same quarter a year ago is a bad period to compare against for Microsoft.

The numbers Microsoft announced Thursday, meanwhile, also include $1.74bn in deferred revenue from sales of Windows 7 earlier in 2009, from the various offers to consumers that could not be accounted for until the second quarter. These take some of the growth off of Microsoft's numbers.

If you're generous and include the deferred revenue in those overall numbers, then Microsoft's second quarter was a respectable performance. However, it was lower than the last, good second-quarter - the final three months of 2007 before the sub-prime bubble burst - when the Windows unit grew 67 per cent while corporate revenue jumped 30 per cent.

The numbers for the last three months of 2009 would also cast doubt on Microsoft's claim of "exceptional" demand for Windows 7. That means it was more like business usual.

Gartner said recently the Widows 7 launch did not create additional PC demand, but that it was a good "market tool". In other words, people were already in the market, and retailers and OEMs used the new operating system to close the deal. The main selling point was price.

For all it's issues in this latest quarter, Microsoft does have one reason to be grateful for Windows 7. Income from Windows dominated Microsoft's business for the period, accounting for 80 per cent of all the money Microsoft made.

Revenue for Server and Tools grew 3.4 per cent to $3.8bn, with income at $1.4bn, and the Business Division - home to Office - fell 2.7 per cent to $4.74bn. with income of $3bn.

Revenue for Microsoft's Online Business - home to Bing - fell 4.5 per cent to $581m, increasing its loss, while the Xbox and Windows Mobile stable of Entertainment and Devices division saw revenue drop 10 per cent to $2.9bn, while income popped up 188 per cent to $375m. ®

The Essential Guide to IT Transformation

More from The Register

next story
Secure microkernel that uses maths to be 'bug free' goes open source
Hacker-repelling, drone-protecting code will soon be yours to tweak as you see fit
KDE releases ice-cream coloured Plasma 5 just in time for summer
Melty but refreshing - popular rival to Mint's Cinnamon's still a work in progress
NO MORE ALL CAPS and other pleasures of Visual Studio 14
Unpicking a packed preview that breaks down ASP.NET
Cheer up, Nokia fans. It can start making mobes again in 18 months
The real winner of the Nokia sale is *drumroll* ... Nokia
Put down that Oracle database patch: It could cost $23,000 per CPU
On-by-default INMEMORY tech a boon for developers ... as long as they can afford it
Another day, another Firefox: Version 31 is upon us ALREADY
Web devs, Mozilla really wants you to like this one
Google shows off new Chrome OS look
Athena springs full-grown from Chromium project's head
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
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.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.