backtop

Print 38 comment(s) - last by EricMartello.. on Jul 27 at 1:32 AM

Microsoft's Steve Ballmer and Steven Sinofsky experienced disappointment about their company's slipping sales, but are still pumped about Windows 7.  (Source: TwitPic)
Microsoft is counting on Windows 7 to reverse its fortunes

Microsoft's track record of late has been mixed.  While its Xbox 360 sells relatively well and has an excellent game-attach rate, it is still overshadowed in total sales by the Nintendo Wii.  Microsoft's Zune has failed to generate significant market share, but it has managed to develop a small but loyal following and a significant amount of hype over its upcoming OLED touchscreen model.

However, Microsoft's core business has always been operating system sales, and the economy has hit that sector hard.  Facing declining PC and server shipments, Microsoft saw its sales drop on a year-to-year basis for the first time in its history (Microsoft just ended its fiscal Q4 2009, closing the year).  Only once before had Microsoft experienced even a quarterly drop -- which happened to be last quarter, calendar Q1 2009. 

Quarterly sales saw a big decline, dropping to $13.1B USD, down 17 percent from $15.84B USD last year.  Profit for the quarter was down 29 percent to $3.05B USD.  Profits were hurt by the Windows 7 upgrade program, legal charges, suffering investments, and the need to pay its laid off employees severance benefits.

Chris Liddell, chief financial officer at Microsoft comments, "Our business continued to be negatively impacted by weakness in the global PC and server markets.  In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter."

Microsoft posted $58.44B USD in yearly sales and $14.57B USD net profit, down from $60.42B USD and $17.68B USD net profit in calendar Q2 2008 (Microsoft's fiscal Q4 2008).

Microsoft did manage to trim operational expenses to $9.11B USD, down from $10.16B USD last year.  And despite the decline, Microsoft still beat competitor Apple, which experienced a strong growth quarter, in profit; Apple only mustered $1.23B USD in profit. 

Furthermore, Microsoft has a very important trump card up its sleeve -- Windows 7.  Given the OS's tremendous popularity in the testing community, it would unsurprising to see it generate Windows XP-like sales.  For Microsoft those sales can't come too soon as it faces increased investor scrutiny as a result of its unusual slippage.

Comments     Threshold


This article is over a month old, voting and posting comments is disabled
Poor Microsoft! ....?
By just4U on 7/24/2009 10:45:51 AM , Rating: 2
It's interesting news but Microsoft makes so much money as it is all you can really feel is envy. I don't quite see how invester scrutiny would come into play?

Wouldn't they realize that we are under a global recession that is going to impact sales? They should be standing on the board room tables doing a happy dance since they are in such good shape overall.




RE: Poor Microsoft! ....?
By PitViper007 on 7/24/2009 11:01:04 AM , Rating: 5
Anytime a corporation doesn't increase performance, they invite scrutiny from their investors. It doesn't matter the environment they are operating under. Is it fair? Is it realistic? No to both, but that's corporate life.

Personally, I'd be ecstatic being able to pull in any kind of profit in this economy let alone over $14.5 BILLION .


RE: Poor Microsoft! ....?
By MrBlastman on 7/24/2009 11:16:42 AM , Rating: 2
They did not meet or beat estimates so they got punished. It is just how things work. With that said - I don't think this is a time to cry about Microsoft's poor performance. Windows 7 is just around the corner and from what I've seen and heard, it makes up for Vista's shortcomings and could easily be the next Windows XP. I think we won't see this happening again for some time with their earnings. It only looks like they'll be going up. :)


RE: Poor Microsoft! ....?
By Hiawa23 on 7/24/2009 2:57:30 PM , Rating: 3
Excuse me, but I really can't feel bad for MS. Yeah, the numbers aren't what they were compared to the previously high MS standards, but given the way things are in the economy, the whole Xbox RROD fiasco, MS is in a good position. Yeah, all things considered, things could be better or could be worse. So they had 10 or years plus of huge numbers & an 09 year with not so huge numbers. Not alarming to me. Things will get better as the recession comes to a close whenever that happens.


RE: Poor Microsoft! ....?
By PitViper007 on 7/24/2009 4:04:05 PM , Rating: 2
And I agree. I was commenting on just4U's assertion that because we're in a recession, Microsoft's investors (stockholders) should understand the decline. And unfortunately that's not how it works.

I in no way feel bad for Microsoft. I think that all things considered, they are doing remarkably well, considering that many companies are posting actual losses rather than declines in profit.


RE: Poor Microsoft! ....?
By Hiawa23 on 7/24/2009 4:57:11 PM , Rating: 2
And I agree. I was commenting on just4U's assertion that because we're in a recession, Microsoft's investors (stockholders) should understand the decline. And unfortunately that's not how it works.

I in no way feel bad for Microsoft. I think that all things considered, they are doing remarkably well, considering that many companies are posting actual losses rather than declines in profit.

I agree 100%


RE: Poor Microsoft! ....?
By Skott on 7/24/2009 11:19:35 AM , Rating: 4
They've already said that Vista was making them profit. Maybe not as big as XP did but still a profit. It really has more to do with the recession than anything else. PC sales are down due to the recession and that is what affecting MS the most. Windows 7 won't earn them huge profits unless PC sales pick up.


RE: Poor Microsoft! ....?
By HrilL on 7/24/2009 12:28:34 PM , Rating: 3
It will if corporations decided to upgrade to it. No PC sales need to happen but volume customer sales is where the real money is made. We're going to roll out windows 7 on most of our machines. Already have the RC running a few machines.


RE: Poor Microsoft! ....?
By robert5c on 7/24/2009 12:39:14 PM , Rating: 3
yup to that, and

i see pc sales also slowing because in my view...the pc's you might buy today are similar to the one you bought 2 years go just at a lower price...

especially since most people probably already own a computer withing their needed performance level if they bought one in the last three years...buying a new PC doesn't have to happen...

they could just be still sitting in XP, and hearing how they can get the same or better performance* (*new install) with a ton of new bells and whistles and none of the problems that scared them from vista...all for a hundread or so bucks...

so i do see windows 7 selling alot of retail copies too...cause lets face it, their are a lot of PC's out there running XP that the consumer is happy with and doesn't see a need to replace.


RE: Poor Microsoft! ....?
By mindless1 on 7/24/2009 6:17:35 PM , Rating: 2
It's not just the recession. It's the obvious truth.

That truth is that most people are not longing for some new killer app on their PC. If MS had not improved windows with each version they'd not have sold as many licenses as they did.

There comes a point where the software, and the hardware is "good enough" for someone's use that they are not willing to respend hundreds of dollars over and over again.

This was inevitable. Surely nobody thought humans would be on the upgrade train forever? It really does take a truely killer app to make most people think hard about upgrading. We are the enthusiasts, maybe even geeks, but the average joe is not caring about benchmarks of things he isn't doing with his PC.

We are now at the point with mere dual core CPUs and 4GB memory, that the average consumer has no reason at all to upgrade their hardware or OS till it is forced upon them. In fact many of them wouldn't even have as modern a system as they do if it were not for a hardware failure, the high cost of repairing legacy hardware, and that newer windows versions were bundled with ready-built systems so their current "upgrade" from the last system was just what seemed as cheap and cost effective.

There's nothing cost effective about further upgrades till something BIG comes along that substantially impacts lives beyond the typical computing experience. That goes doubly for an OS upgrade, only the geeks really want to relearn the interface just to spout hypothetical advantages while the rest of the world does manage to get along fine with WinXP.


RE: Poor Microsoft! ....?
By EricMartello on 7/27/2009 1:32:10 AM , Rating: 2
quote:
We are now at the point with mere dual core CPUs and 4GB memory, that the average consumer has no reason at all to upgrade their hardware or OS till it is forced upon them.


There was a time when nobody ever needed more than 640KB of memory to run a program...fine for the average user...but things changed.

A lot of the compelling reasons to upgrade a system are and have always been for entertainment. The ability to play the newest games, to be able to decode hi-res video without dropping frames, to multitask, to encode/transcode your own video.

I don't know how you are identifying the "average" consumer, but a lot of average consumers nowadays can take advantage of and benefit from upgraded systems. HD camcorders are commonplace, many people watch bluray or want to view H.264 video. A lot of people want to transcode their videos and music so they can save them on a home media server - I know I do - an all of these things benefit from more powerful processors. Perhaps the most obvious reason to upgrade - playing the newest games with all eye-candy enabled will always push PCs to their limits. You think gaming is "good enough" as it is now? Well then you're just too narrow-minded to see the possibilities that we have yet to exploit.

There are always going to be people who think what they have is "good enough"...that's why you still got people running XP because Vista "runs too slow" on their Pentium 3 with 512 MB of ram...and to convert these people you're going to have to show them something that blows them away.

Anyway your screen name on here is very accurate. :) Upgrade train? LOL If you're content with mediocrity that is one thing, but don't assume everyone else is.


RE: Poor Microsoft! ....?
By sebmel on 7/24/09, Rating: 0
RE: Poor Microsoft! ....?
By crystal clear on 7/25/2009 9:02:42 AM , Rating: 2
quote:
Wouldn't they realize that we are under a global recession that is going to impact sales?


Blaming the recesssion for your failures is NO EXCUSE !

If Intel can beat the recession so can Microsoft.

Look at Intel-

Second-Quarter Revenue $8.0 Billion, Up 12 Percent Sequentially
Gross Margin 51 Percent, Up 5.5 Points Sequentially

Intel’s second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half,” said Paul Otellini, Intel president and CEO.



http://www.intc.com/releasedetail.cfm?ReleaseID=39...

BAD management thats all !


RE: Poor Microsoft! ....?
By dark matter on 7/25/2009 11:36:56 AM , Rating: 2
Bad government more like..


Fire the CEO
By crystal clear on 7/25/2009 8:45:08 AM , Rating: 2
Intel's core business is selling chips into the PC market where Microsoft's O.S. are used,the Wintel machines.

Intel reports healthy revenues/profits (before deducting the E.U. fine) strange why/how Microsoft results show sharp declines & losses.

The recession & a sharp decline in PC sales, the excuse given by Microsoft should effect Intel also, but still Intel comes out better under these tough conditions.

This shows Microsoft has a sluggish,bloated management that needs to be FIRED start with CEO then move downards in the management structore.

BAD management thats all-No excuses, if Intel can make a profit then there is NO reason why Microsoft cannot or does not.

Microsoft O.S. are used in both Intel & AMD machines so why the losses.

If Apple can beat the recession with their expensive high end stuff then it should be even easier for Microsoft with their lower priced proudcts to beat the recession.

Fire the CEO....




RE: Fire the CEO
By dark matter on 7/25/2009 11:39:54 AM , Rating: 2
Oh yeah, sacking managers is really going to get consumers buying new computers. You should get a job on Wall Street, they are about as thick as you already.


RE: Fire the CEO
By crystal clear on 7/25/2009 7:26:44 PM , Rating: 2
If Intel is selling chips so can microsoft sell their products just like Apple does & others showing profits.

Sacking managers is the solution because they mess up & the ordinary employee gets fired ....

Why do they get those huge salaries/bonuses/perks ?

For what ? to come up with lames excuses blaming this & that.

They get highly paid to perform & deliver the results.

Intel not only gave some healthy results ,now they are raising money to buy back their own shares in recessionary times,

Just look their sites for more details.


More insight from DT business articles please
By Taft12 on 7/24/2009 12:30:24 PM , Rating: 2
This is a disastrous result for MS next to recent good news from Oracle and Intel. I am not a business news junkie by any means, but there was an lot more insight in the Bloomberg piece

http://www.bloomberg.com/apps/news?pid=20601087&si...

Also,
“The economy continues to be challenging and we need to lift our game to another level,” Chief Financial Officer Chris Liddell said on a conference call.

One step in the right direction would be to fire this idiot.




By crystal clear on 7/25/2009 6:19:59 AM , Rating: 2
The CFO's comments remind me of AMD at a conference call announcing another quarter of losses.

They gave similar excuses & still do....remember Hector...


Strange Microsoft/Apple Comparison
By ltcommanderdata on 7/24/2009 2:03:50 PM , Rating: 1
http://news.cnet.com/8301-13860_3-10294232-56.html

Some interesting breakdowns include the Client division (Windows) having revenue fall more than 25% and the Entertainment and Devices division (XBox and Zune) likewise having revenue fall 25%. If it were Apple having OS X or iPod/iPhone sales contract 25%, I'm sure many people would be in an uproar preparing for Apple's funeral. It's interesting that the article mentions that Microsoft's absolute profit is still larger than Apple's when, if I'm not mistaken, Microsoft is a much larger company so a direct 1:1 comparison of raw profit wouldn't put Microsoft in a good light.

Despite what people may say, Apple's strategy does appear to be working. While Microsoft reported what appears to be their worst quarter ever and offered PC sales falling 5-7% as a reason, Apple reported their best non-holiday quarter ever with Mac units sold increasing year-over-year despite the recession and contracting PC market and the latest reports indicating that Apple has increased it's market share to 91% of computers sold over $1000. There's something to be said for being able to sell more units at a higher price in a recession while other OEMs are in a race to the bottom with cheap computers and netbooks and despite Microsoft's ads saying that Macs are too expensive. Realistically, a $1000-$1500 computer isn't exactly a premium product and can still be considered mid-range. Dell and HP shouldn't be ceding so much mid-range marketshare where the volumes and profit margins are.




By sebmel on 7/24/2009 4:08:49 PM , Rating: 2
and in other news today:

http://news.cnet.com/8301-10805_3-10292031-75.html...

Microsoft close their YouTube rival... did you know they had one?

That popular... huh.


MS knew this before hand...
By smackababy on 7/24/2009 10:58:19 AM , Rating: 2
I am pretty sure they were ready for this to happen. Think about it. With Windows 7 about to be released in a few months and with the global recession, of course people won't be buying Vista right now. I would be willing to bet they are happy they are even doing this well right now. At least they didn't post their first loss like Sony did recently.

And as far as the "pre order pricing hurt profits" from the article... seriously? I bet that added quite a bit to the sales. There is no way selling a product that costs minimal amounts to press at a discounted rate could hurt sales figures. Sure, they have to sell more, which I'm sure they did, and haven't even had to ship it yet.




suites them right
By romansky on 7/24/2009 2:42:25 PM , Rating: 2
After firing so many the last time they "only made .5bil less PROFIT "

Seriously, who cares about share holders?




Tzolk'in
By MODEL3 on 7/24/2009 3:06:19 PM , Rating: 2
OMG, Microsoft Posts First Annual Calendar Sales Drop in Its History?

I though we would first apply the Tzolk'in Calendar before that even happens.




Where?
By IcePickFreak on 7/24/2009 4:28:44 PM , Rating: 2
Where is the link to donate money to MS, this is tragic.




1-20-2009
By hiscross on 7/24/2009 4:56:17 PM , Rating: 2
And how is that working out? Who Is John Galt?




By ggordonliddy on 7/26/2009 1:02:05 PM , Rating: 2
If they stopped copying Apple's iSh!t products, maybe I'd give a crap. As it is, they can all rot in hell for destroying anything enjoyable about computing.




Oh noes!
By UNHchabo on 7/24/2009 12:24:45 PM , Rating: 1
quote:
Microsoft Posts First Annual Calendar Sales Drop in Its History


Oh no! Microsoft has a drop in calendar sales, and they expect this to be the first in a series of years when this happens!

;)




RE: Oh noes!
By MatthiasF on 7/24/09, Rating: 0
Mick's bias clouds facts
By MatthiasF on 7/24/2009 7:35:57 PM , Rating: 1
I went on a fact finding mission, as I always do when reading Jason Mick's sensationalized articles, since he doesn't seem to do it himself.

This is not "Microsoft's First Annual Calendar Sales Drop in Its History". It's the first time annual sales for WINDOWS has dropped in it's history.

Reuters had the good sense to fact check before posting this blunder.

http://www.nytimes.com/reuters/2009/07/23/business...

Portfolio.com, NPR and numerous other sites quickly corrected themselves. How about you guys follow their lead?




Life is tough
By andrinoaa on 7/24/09, Rating: -1
RE: Life is tough
By ClownPuncher on 7/24/2009 12:30:14 PM , Rating: 5
Yea, stupid company. Companies should not want to make profit, the should want to make panda bear hugs and rainbow dust smiles.


RE: Life is tough
By gyranthir on 7/24/2009 2:40:06 PM , Rating: 2
Profit is good.

That's the point, they use that to research new products, invest in other products/investments, dividend it to their shareholders, give back to charity, etc.


RE: Life is tough
By HinderedHindsight on 7/24/2009 4:04:40 PM , Rating: 2
Yes, let's give to charity, meanwhile let's cut costs by outsourcing, thereby driving down the costs of labor within our own local community.

I would be more convinced of the argument that profit is good when the strategies of corporations isn't selling goods at the highest price at the lowest cost, even if it means cutting corners and releasing substandard products. As we've seen recently, profit in many cases is squandered on the few privileged people, meanwhile leaving hardworking employees with substadard pay (if they are even able to retain their jobs at all) and leaving consumers with substandard products.

I'm not saying all of Microsoft's products/services are horrible, in fact, most are solid, but they have missed the mark of quality on quite a few of them in recent years.

The point is this: how much would you bet that while they're laying off people (particularly American citizens) and posted a sales loss Balmer still got his bonus? If Ballmer gets a bonus for still posting a profit, they shouldn't be laying people off. If they're laying people off because of sales losses, Ballmer shouldn't be getting his bonus. Would keeping 5,000 people employed have substantially hurt their almost 15 billion in profits? Only if the cost of keeping those employees was roughly $300,000,000 each (including wages, benefits, HR costs).

I'm sorry, it's really hard for me to buy the idea that profit is good because they can invest in anything (including new products and investments), when they're not even investing in themselves by investing in their employees. It's hard to expand your operations into new markets and new products when you're letting people go.


RE: Life is tough
By ClownPuncher on 7/24/2009 5:29:35 PM , Rating: 2
Employee satisfaction is pretty high at Microsoft, at least here in WA, I have no idea how it is overseas and in other states.

They rarely have laid off employees for financial reasons. The pay is very very competitive, benefits are good, and the work atmosphere is definitely NOT sweat shop.

You have to realize that the bulk of their employees work here in the US. Cost of labor in their local community ( East Side, King County, WA ) is quite favorable, the area has a high quality of life index and a pretty rosy picture when it comes to per-capita.

In other words, rather than suck the state dry, the company has been invaluable in keeping wages competitive and stimulating new growth.

I'm sorry folks got laid off ( 2 of my close friends among them ) , but it happens. Should they batten down the hatches when an economical storm is brewing, or should they wait till after the storm to assess the damages? My money is on the former.


RE: Life is tough
By HinderedHindsight on 7/24/2009 7:31:01 PM , Rating: 2
Funny you should mention that you live in King County- I actually live in Bellevue. Some MS employees might be happy, but it depends on what division they're in. It's hard to live King county and not know people from vairous divisions of Microsoft; a good number are happy, while a good enough number are miserable.

My commentary however, was on the bigger picture of how profits are used, not necessarily the specifics of how they treat employees.

Is it a good idea to batten down the hatches in an economic storm? Sure, but does it make sense to lay off your least expensive employees while providing your most expensive executives with bonuses in the economic undercurrent you're talking about? I'm going to go with no.

Further, given Microsoft's preference for providing jobs for H1-B visa holders, you can't say they've kept wages as competitive as they might have been with hiring local talent. There are several other tech companies that are headquartered in the area that depend on local talent which have done far more to keep local wages competitive such as T-Mobile and Amazon. Microsoft, comparatively, has excercised the use of H1-B employees as far as they possibly could. Using H1-B employees do not keep local wages competitive.

Again, not saying everything they do is bad, but they could be doing a whole lot more.


RE: Life is tough
By andrinoaa on 7/25/2009 8:33:49 AM , Rating: 2
better if they didn't take so much in the first place. My guess is that they made $15b AFTER all their R&D and philanthropic donations. Not a bad job!


RE: Life is tough
By andrinoaa on 7/25/2009 8:35:25 AM , Rating: 2
better if they didn't take so much in the first place. My guess is that they made $15b AFTER all their R&D and philanthropic donations. Not a bad job in the current environment. If they don't get win7 right can I get a refund due to shoddy coding?


"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton











botimage
Copyright 2012 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki