Feeds

Windows 7 misses Microsoft's summit of success

Beware the false bottom

The essential guide to IT transformation

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. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
BBC: We're going to slip CODING into kids' TV
Pureed-carrot-in-ice cream C++ surprise
China: You, Microsoft. Office-Windows 'compatibility'. You have 20 days to explain
Told to cough up more details as antitrust probe goes deeper
Windows 7 settles as Windows XP use finally starts to slip … a bit
And at the back of the field, Windows 8.1 is sprinting away from Windows 8
Linux turns 23 and Linus Torvalds celebrates as only he can
No, not with swearing, but by controlling the release cycle
Scratched PC-dispatch patch patched, hatched in batch rematch
Windows security update fixed after triggering blue screens (and screams) of death
This is how I set about making a fortune with my own startup
Would you leave your well-paid job to chase your dream?
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.
Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
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.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?