Feeds

Microsoft's 'record' quarter can't match Apple

Windows 7 - it coulda been so much better

Internet Security Threat Report 2014

If Microsoft hoped that reporting "record" quarterly results would send its stock skywards in Apple-like fashion, then it hoped in vain.

On Thursday, the software giant announced fiscal-third-quarter revenues of $14.5bn, a 6.2 per cent leap from the same quarter last year, while net income rose 34.5 per cent to $4bn. Earnings per diluted share increased 36 per cent to $0.45.

Earlier this week, desktop and phone rival Apple also reported record revenues and profits. Jobsian revenues climbed 48 per cent to $13.50bn, and profits jumped 89 per cent to $3.07bn - or $3.33 per share. But whereas Apple's share price rose 6.6 per cent, investors forced Redmond's stock price down more than three per cent. Things are certainly up from this time last year. But this time last year, Microsoft recorded its first ever year-on-year revenue decline.

Adding insult to injury, Apple became the S&P's second largest company in terms of market cap on Thursday, supplanting - guess who? - Microsoft.

Windows 7 did give Redmond a shot in the arm. Microsoft's Windows and Windows Live business - home to the client operating system - saw sales grow 28 per cent to $4.4bn, while net income increased 34 per cent to $3bn.

But for the normally-robust Server and Tools business, revenues grew a mere 2.4 per cent to $3.5bn and profits grew only 2.5 per cent to $1.2bn. Meanwhile, the Microsoft Business Division (MBD) - home to Office and SharePoint - went backwards. Sales fell 5.8 per cent to $4.2bn, while income declined 4.8 per cent to $2.6bn. And the Online Services business - home to Bing - dug deeper into the red. Revenue grew 11 per cent to $566m, while losses increased from $411m to $713m. Advertising revenue was up 19 per cent, driven by search.

On the whole, investors weren't happy, Listening to analysts grill Microsoft's chief financial officer Peter Klein during a conference call on Thursday, it seemed the problems were two-fold: investors had expected a lot more from Windows 7, and they were disappointed to learn that sales have been dominated by consumers, with businesses taking their time with large-scale deployments.

Consumers accounted for 30 per cent of Windows 7 sales, and businesses accounted for 14 per cent. Meanwhile, netbooks held steady at about 10 per cent of the total Microsoft PC market. Netbooks are tricky for Microsoft, because they run low-priced copies of Windows. They cannot, and do not, run the kinds of big, fat premium SKUs that bring in the money.

It's generally believed the recession in the US is over, but according to Klein, sales cycles are lengthening, and one investor sounded genuinely shocked. Klein explained that Microsoft has only started to see the beginning of a business hardware-refresh cycle. But "a high percentage" of customers are in pilot or "pre deployment mode" on Windows 7 and indend to deploy "as soon as possible".

Another issue is that a good chunk of the Windows 7 business is not coming from actual end-users - the type of buyers that prove genuine demand. Sales to PC OEMs were up by 30 per cent in terms of units and and 29 per cent in terms of revenue, but OEMS are making PCs in anticipation of future demand.

Clearly, Klein is hoping for future growth from a forthcoming wave of products around Office 2010 and Windows Phone 7.

Windows Phone 7 won't hit until the end of the end of the calendar year, while Office 2010 and SharePoint 2010 won't officially launched until May (before becoming available in June). But Microsoft is already taking bookings on Office: it pulled in $305m during the third quarter. But that's money the company can't yet claim, Klein said this meant that Microsoft earned $14.5bn rather $14.8bn. ®

Beginner's guide to SSL certificates

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
prev story

Whitepapers

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.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
New hybrid storage solutions
Tackling data challenges through emerging hybrid storage solutions that enable optimum database performance whilst managing costs and increasingly large data stores.