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Windows 7 is the fastest selling OS in history, propelling Microsoft to big gains.  (Source: Paul Sakuma, file / AP Photo )

Bing/Yahoo and Windows Mobile 6.5, though, are suffering in terms of market share. Both share a common problem -- Google.  (Source: MobileTech World)
Windows 7 is the best-selling OS in history, so why aren't investors taking note? Look to the mobile and search businesses...

Following its perennial rival Apple's announcement of a terrific quarter, Microsoft had some good news of its own.  At 5:30 p.m. E.D.T. Thursday evening, Frank Brod, Microsoft's chief accounting officer, and Bill Koefoed, general manager of Investor Relations at Microsoft, announced earning information for Microsoft's quarter ending March 31.

The news was impressive.  Microsoft's fiscal third-quarter revenue totaled $14.50B USD, up 6 percent from the same quarter a year ago.  Factoring in the deferral of $305 million of revenue relating to the Microsoft Office 2010 Technology Guarantee program, the revenue totaled $14.81B USD, a rise of 8 percent.

Operating income, net income and diluted earnings per share were $5.17 billion, $4.01 billion and $0.45 per share, increasing 17 percent, 35 percent, and 36 percent, respectively, from a year ago.

Those gains came largely on the back of Windows 7, the fastest selling operating system in history.  Peter Klein, chief financial officer at Microsoft, comments, "Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox LIVE and our emerging cloud services.  Our record third-quarter revenue along with continued rigor on cost management resulted in exceptional EPS growth."

Windows revenue rose 28 percent for the quarter as Windows 7 reached 10 percent of active systems worldwide.

Kevin Turner, chief operating officer comments, "Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong.  We are also seeing tremendous interest in our market-leading cloud services for business."

Despite the terrific success, investors aren't showing Microsoft as much love as one might expect.  Microsoft stock actually dropped a bit over 1 percent in after hours trading.  Granted, it rose in the last couple weeks, but overall it's up just over 25.8 percent since early October 2009.  Apple's stock, by contrast, is up 47.8 percent.

One possible reason for investor's unusual lack of bullishness is weaknesses in the non-Windows part of Microsoft's platform.  Xbox and Zune business units are performing decently, but the critical Windows Mobile business has been losing large chunks of market share.  

Microsoft's Windows Phone 7 OS can't come soon enough, but that product faces skepticism from smartphone shoppers due to its lack of support for multi-tasking and copy-and-paste.  Meanwhile, it is likely that Microsoft's existing smartphone OS, Windows Mobile 6.5, will get passed by Google's Android OS sometime this quarter.  That's a troublesome sign as more computing jumps to the mobile realm.

In the internet search business Bing has failed to grow, as well.  According to market research firm Net Applications, Bing has dropped from a peak marketshare of 3.52 percent in August to 3.11 percent in March.  Partner Yahoo, whose search is now powered by Bing, has suffered even more dropping from 7.28 to 5.38 percent over the same time period.  Meanwhile, between July and March, Google jumped from 78.45 percent to 85.75 percent.  Those numbers paint a rather bleak picture for Microsoft's long-troubled search efforts, which it has poured money into.

Ironically, both in the mobile phone and the search markets, Microsoft has the same problem, and that problem has a name -- Google.

So while the company has plenty to celebrate, thanks to the storied Windows 7, there won't be much fanfare in the earnings reports for the languishing smartphone or search engine business units.



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Windows 7 was my idea
By hellokeith on 4/22/2010 10:57:50 PM , Rating: 2
Microsoft is doing well these days, and it has earned the well-deserved praise and substantial financial rewards.

Windows 7 is of course very strong, but Microsoft also has a strong back-office portfolio. They have a server product for just about every conceivable business need on multiple tiers.

It is interesting that Microsoft gets criticized in the mobile space, yet Windows Media has quite wide-spread hardware support in nearly every non-Apple gadget, phone, car receivers, and home theater receivers. WMA has wider mobile hardware support than AAC, and WMV has wider mobile hardware support than FLV / MPEG-4.

Competition will only make a good Microsoft even better.

And I would like to thank Charline in person for Windows 7:
http://www.youtube.com/watch?v=WZVKNxS8KeQ




RE: Windows 7 was my idea
By amanojaku on 4/23/2010 1:03:35 AM , Rating: 1
quote:
And I would like to thank Charline in person for Windows 7
You just want to be IN her person. And there's no shame in that.


RE: Windows 7 was my idea
By sebmel on 4/23/2010 1:03:06 PM , Rating: 1
As usual Mick doesn't explain.

The market has grown accustomed to seeing Microsoft fail to make money from the Xbox, hotmail, Windows mobile, Zune, the music store and so on... but they at least expect the big three to do OK:

Server, Office and Windows.

Windows 7 numbers looked OK but a big chunk of those sales were pre-sales to OEMs and in the light of that they aren't exciting.

The serious issue, however, is Office and Server products... they didn't perform well. Server and Tools business revenues grew just 2.4%. Microsoft Business Division (Office and SharePoint) sales fell 5.8% to $4.2bn, and income declined 4.8% to $2.6bn.

The market is looking at that, and then noticing that Apple's net profit rose 89%.

One day, Mick, you'll actually report the whole story... surely. It's just probability.


RE: Windows 7 was my idea
By Drag0nFire on 4/23/2010 3:25:21 PM , Rating: 1
quote:
One day, Mick, you'll actually report the whole story... surely. It's just probability.


A monkey with a typewriter would have a better probability...

Although I can't help feeling that he's been doing better recently. Maybe I'm just getting complacent.


RE: Windows 7 was my idea
By bupkus on 4/23/2010 3:23:38 AM , Rating: 2
quote:
Windows Media has quite wide-spread hardware support in nearly every non-Apple gadget, phone, car receivers, and home theater receivers. WMA has wider mobile hardware support than AAC, and WMV has wider mobile hardware support than FLV / MPEG-4.

Wow! Just by this description I would think my Palm Treo Pro with Windows Mobile 6.1 is a dream and not a continuing annoyance and bore.


RE: Windows 7 was my idea
By Zingam on 4/23/10, Rating: -1
RE: Windows 7 was my idea
By Gio6518 on 4/23/2010 8:55:17 AM , Rating: 5
quote:
Just today action center reports me that there are 6 security updates that I have to install because and attacker could harm my system


would you prefer if they went the apple route.....and just deny it, claim it doesnt exist, and leave your system open and vulnerable to attack


RE: Windows 7 was my idea
By XZerg on 4/23/2010 10:42:15 AM , Rating: 2
I like getting the updates right away too but at the same time I find it being notified of a new update every time I start my computer is plain annoying. They ought to make these updates available once a month unless they are super emergency. The drivers and some software updates should be configurable to check every month or three or greater instead of every time system turns on!

Having the system be most up to date every time is probably a need of very few, specifically those who have too much time on their hand and spend it on computers instead of elsewhere.


RE: Windows 7 was my idea
By MrFord on 4/23/2010 11:17:18 AM , Rating: 2
It's called "Patch Tuesday"...

And if you don't see the need to have important updates available ASAP, I imagine "Blaster" ans "Sasser" won't ring a bell.


RE: Windows 7 was my idea
By Spivonious on 4/23/2010 9:57:19 AM , Rating: 2
Can't visit Youtube at work. Is that the French girl? She is a cutie.


RE: Windows 7 was my idea
By tdawg on 4/23/2010 11:23:04 AM , Rating: 2
Yes and True


RE: Windows 7 was my idea
By Camikazi on 4/23/2010 11:38:29 AM , Rating: 2
Yep, it's the french chick :)


Some real numbers to know
By hiscross on 4/23/2010 9:29:43 AM , Rating: 2
http://www.marketwatch.com/story/apple-passes-micr...

"Over the last decade, Apple's stock has risen from $7 to $266 per share. That's over 3500% growth. During that same time frame, Microsoft's stock value has grown a paltry 65%

Apple doubled its net income during one of the worst recessions in our history (2007-2009). Microsoft's income rose a miniscule 5% during that time. "

It is good that Microsoft is healthy, because the US economy can use all the help it can get. The biggest issue with Microsoft is they still believe the desktop is king. Google and Apple have raised the bar and moved to mobile computing. So far, Microsoft doesn't have an answer to mobile computing (please don't tell me WinMobile 7 is their answer because it is clearly a catch up from 2007). I will say Win7 desktop is nice.




RE: Some real numbers to know
By Anoxanmore on 4/23/2010 9:50:03 AM , Rating: 2
Well when you are at the bottom, there are only two options, go up, or go bankrupt. (cough)Apple(cough)


RE: Some real numbers to know
By Mitch101 on 4/23/2010 11:12:20 AM , Rating: 2
It would be a real shame if Apple lost a portion of that iPhone Market to Droid and Microsoft considering it appears the iPhone is Apples only real cash cow.

http://gizmodo.com/5521228/in-case-you-had-any-dou...

Cut off the iPhone/iPod and its back to 2007 for Apple. The sharks are circling the waters.

Droid Shark is starting to take a bit of that Apple.
http://gizmodo.com/5504622/how-the-iphone-could-en...


RE: Some real numbers to know
By hiscross on 4/23/2010 11:38:30 AM , Rating: 2
It's all about performance kiddies. If you take Win OS and Office away from Microsoft they would collapse since those two products are their cash cow. Every good and strong company has a cash cow or two and that is why they are strong. Competition is also needed, so the Andriod thing is good for Apple since it pushes them to make a better product. It is clear you people don't own and operate a business and your examples reflect your lack of understanding of business. Yes, I won and operate a business and I am a capitalist just like Steve.


RE: Some real numbers to know
By Mitch101 on 4/23/2010 12:08:28 PM , Rating: 2
If you really had a business of 10 people or more you might have mentioned Microsoft Small Business Server which is an incredibly affordable and useful package for small businesses.

I also suppose you dont think Microsoft doesn't make any money from Sharepoint, Exchange, Windows Servers, SQL, ISA, Visual Studio, product support, or Forefront products to name just a few. Ever heard of Microsoft corporate license plans they can go into the millions of dollars for a company.


RE: Some real numbers to know
By hiscross on 4/23/2010 2:21:21 PM , Rating: 1
You really need to read my last post. If you did then you would have pointed out I wrote won instead of own. Yes, I very familiar with Microsoft products since I used most of what you wrote at various places I've worked. Some are better than others, but to own any of them, no thanks. My MacOSX Server works just fine.


RE: Some real numbers to know
By Anoxanmore on 4/23/2010 3:34:38 PM , Rating: 2
Well since you are so much like Steve, so much for your hot girl theory. :(


RE: Some real numbers to know
By Mitch101 on 4/24/2010 9:25:34 AM , Rating: 2
quote:
You really need to read my last post


I did and it really doesnt matter how you aquired said buisness. Microsoft has many cash cows not just on a consume level but on a buisness level as well. Apple only real cash cow is its phone and with its limited market of AT&T and other companies coming with products as good as the iPhone but with alternative carriers that Apple cash cow is about to get a trim.


RE: Some real numbers to know
By jonmcc33 on 4/23/2010 12:24:04 PM , Rating: 2
All due to iTunes, iPhone and iPod sales. If you want to compare just OS sales then Apple would be insignificant, because you need to buy their hardware with the OS.

Then lets count office productivity sales. How much does Apple have with that? Ooooo...burn!

Then we can count video game console sales. Is there anything from Apple? Anything? Hello?


Numbers for search
By eddieroolz on 4/23/2010 12:04:34 AM , Rating: 2
I was under impression that Bing held ~9% of the market while Yahoo had ~17%, though the article claims Bing only had 3.5% at peak and Yahoo held to only 7%.

I think the numbers are a bit off in this article. Granted, I do realize the numbers change depending on how it's measured, but those are pretty big discrepancies.




RE: Numbers for search
By JasonMick (blog) on 4/23/2010 1:08:21 AM , Rating: 3
I appreciate the feedback, but I would like to point out that the higher numbers you reference come from Hitwise and comScore.

Net Applications (which I use) claims a unique visitor count of 160 million people per month. ComScore only counts about 2 million unique visitors a month, while Hitwise collects less than that. I'd say Net Applications' numbers offer the best reflection of the global search market.

That said, regardless of what's going on exactly in search market share, it's hard to argue that Microsoft's phone campaign is a bit of a mess at the moment, particularly when they lose more market share than Palm over the last quarter and release news that their upcoming OS is missing crucial features (multi-tasking).

Fortunately for Microsoft Windows 7 is an awesome operating system and selling like crazy. They're unlikely to have much if any financial problems for the next few years because of it.

And Zune and the Xbox are doing reasonably well too.


RE: Numbers for search
By eddieroolz on 4/23/2010 2:01:59 AM , Rating: 2
Thanks for the clarification, Jason. I guess it really varies depending on the source one uses.


RE: Numbers for search
By mckinney on 4/23/2010 12:18:08 PM , Rating: 2
I am glad MS did well this quarter. Unfortunately, it appears they (like Apple) got called on the use of child labor on their products made by out of country contractors.

http://www.nytimes.com/2010/04/20/technology/20sof...

http://www.businessinsider.com/microsoft-slammed-o...

Personally, I dont see why this gets national attention.


By brokenaxiom on 4/23/2010 12:13:50 PM , Rating: 3
These stories work like clockwork: "Microsoft makes great money..." followed by a million comments on the supremacy of Apple and how Microsoft is doomed in the next five years.

What you people simply don't understand is that Microsoft is a fortress both in talent and in money. They have huge amounts of R&D centers across the world and have acquired three to four research firms pretty much every single year. This means they have the ability to make a very complex product very quickly. Don't believe me look at Windows 7 or office 2010.

As for their monetary stability, Microsoft has so many long term contracts, subscriptions, and brand loyalty that they can comfortably coast for years without much innovation- much like IBM.

But what is truly amazing is that Microsoft isn't just milking long term money, they are setting up a stable platform for the next 25 years. Sure Google dominates in search right now, but who will have four times as many internet users in just 15 years? China. And who is going to have all that nice market share since Google left? Let's not even mention Bing's growth in India.

As for the mobile sphere, Microsoft isn't targeting Apple. Their primary focus is on RIM. Apple will have to face android and I doubt Apple will win that fight. And unlike Apple, Microsoft actually plays nice with other companies like Adobe, which means the market players are much more willing to support Microsoft than RIM or Apple.

Finally the gaming sphere is always growing. Xbox live cannot be doubted at this point. With a new Xbox due sometime in 2012 and Natal in 2010, Microsoft is maintaining a lead that will eventually reach 50-75 million Xbox live subscribers.

Yet I guess it just doesn't matter. Fanboys will always hate Microsoft for just being Microsoft. So tell me Apple folks what happens after Steve Jobs dies? Microsoft doesn't need its founder; you guys do.




By kmmatney on 4/23/2010 1:33:45 PM , Rating: 2
quote:
followed by a million comments on the supremacy of Apple


This is DT, land of the Apple haters, so I don't know where you get this idea from.

I have to say that I've given Bing a good chance - tried to use it a lot, but in the end the search results still are not nearly as good as Google, at least for the things I search for.


By Tony Swash on 4/24/2010 1:18:34 PM , Rating: 1
quote:
They have huge amounts of R&D centers across the world and have acquired three to four research firms pretty much every single year.


R&D centers that produces a series of interesting demos that never seem to make it into being viable products. Read the MS employee blogs such as http://minimsft.blogspot.com/ where the MS guys and girls are pulling their hair out at how useless the MS RD spend is in terms of generating actual new profitable products.

quote:
This means they have the ability to make a very complex product very quickly. Don't believe me look at Windows 7 or office 2010.


These are not new products emerging from R&D - they are evolving existing products and ones that are almost certainly dominating markets that will shrink in the future. Plus it took how long to get from XP to Windows 7 (via the traincrash of Vista)?

quote:
As for their monetary stability, Microsoft has so many long term contracts, subscriptions, and brand loyalty that they can comfortably coast for years without much innovation- much like IBM.


Thats true to some extent but MS are in markets that are under pressure - desktop is probably in for a long secular slow decline and the server/Office side of the business will probably come under intense price pressure from the likes of Google sooner rather than later. And who can claim that coasting is success!

quote:
But what is truly amazing is that Microsoft isn't just milking long term money, they are setting up a stable platform for the next 25 years. Sure Google dominates in search right now, but who will have four times as many internet users in just 15 years? China. And who is going to have all that nice market share since Google left? Let's not even mention Bing's growth in India.


Microsoft Online Services Division just lost $711 million in the first three months of this year. That's a jaw-dropping $2.8 billion loss annual run rate. This follows years of significant loss. This is the triumph that will save the company?

quote:
As for the mobile sphere, Microsoft isn't targeting Apple. Their primary focus is on RIM. Apple will have to face android and I doubt Apple will win that fight. And unlike Apple, Microsoft actually plays nice with other companies like Adobe, which means the market players are much more willing to support Microsoft than RIM or Apple.


This is actually pretty amusing - let's remind ourselves that MS haven't actually released anything in the smart mobile space as yet except the execrable mobile 6.5 so talking about it beating anyone is I feel a trifle premature. The punchline is the statement that MS knows how to play nice with other companies - was that some sort of surrealistic joke?

quote:
Finally the gaming sphere is always growing. Xbox live cannot be doubted at this point. With a new Xbox due sometime in 2012 and Natal in 2010, Microsoft is maintaining a lead that will eventually reach 50-75 million Xbox live subscribers.


But MS are still not actually making any significant profits from Xbox after pouring billions of dollars of investment in to the project. If this was a standalone business and not a giant hobby financed by the Windows/Office monopoly profits it would have gone bust a long time ago.

The sad and embarrassing truth of MS's predicament is that after a decade and half of intense effort the company has failed to find a single new area of activity or new product line that can generate significant profits and that's with their vast cash resources, their domination of the corporate IT sector, their windows/Office desktop monopoly and their previous (but rapidly eroding) browser domination. To not be able to innovate and develop new profitable business with such advantages is a shameful indictment of the company and its management.


Vista
By Gio6518 on 4/23/2010 9:00:34 AM , Rating: 2
i know im going to take a beating for this but......
i personally prefer VISTA, i have 1 system running Win 7 and everyone in my household all prefer vista, i was going to upgrade all of my computers, but to me Vista seems more polished than 7 and i've had nothing but a stellar experience with Vista.....
guess I'll wait till Win 8




Investors have reason to worry.
By Taft12 on 4/23/2010 10:25:16 AM , Rating: 2
quote:
Windows 7 is the best-selling OS in history, so why aren't investors taking note? Look to the mobile and search businesses...


quote:
Ironically, both in the mobile phone and the search markets, Microsoft has the same problem, and that problem has a name -- Google.


If I were an MS investor, I would be very frightened about just how close the company could be to going off the rails.

It isn't just mobile and search where Google is competing. The OS and Office suite gravy trains face competition from Google and open source as well. Microsoft has proven over and over and over again that it can't create a profitable product outside of its 2 core software businesses

Zune, XBox, Search, WinMobile. The problem is not (always) the quality of the product. It's the lack of profitability.

Their stock price has floundered for many years now and I am not sure they can survive commoditization of the OS and Office suite, at least in their current form.




WALMART SPECIAL
By zenmonkman on 4/26/2010 6:52:22 PM , Rating: 2
WalMart's $374.5 Billion in sales dwarfs Microsoft. Combined oil & gas ... don't mention it. All I'm saying is that our technies are dwarfs in the real world of $$$$.




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