With Apple reporting another record quarter and releasing new products, pressure was high for Microsoft's results. Microsoft just announced its earnings on Friday and at first glance they aren't pretty, representing another quarter of declining revenue.
The numbers appear very dire, with revenue, operating income, net income and diluted earnings per share dropping, 14%, 25%, 18% and 17%, respectively. However, appearances can be deceiving -- this drop was largely because Microsoft deferred $1.47B USD in revenue on Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability.
Adding back this deferred income, though, the results become a mixed bag. Revenue, at $14.39B USD (with the deferred income) still fell 4 percent year to year. However, this isn't as bad as the slide in past quarters. Further, earnings per share rose to $0.52/share, rising over 8 percent from last year, thanks, in part, to cost cutting.
Chris Liddell, chief financial officer at Microsoft emphasized this positive metric, stating, "We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows. We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."
Microsoft's stock rose over 5 percent on Friday, and maintained most of these gains, thanks to the positive side of the results and optimism surrounding Windows 7.
Microsoft's outlook in the near term appears much rosier, even if the current quarter was still a bit rocky. Microsoft has turned to the well received Windows 7 for fiscal salvation, in part, along with a rejuvenated Zune offering, the Zune HD. And thus far, the well-received Windows 7 -- launched last Thursday on October 22 -- hasn't shown any signs of disappointing. Microsoft also hopes to cash in on Windows Server 2008 R2, released consecutively with Windows 7.
Kevin Turner, chief operating officer at Microsoft comments, "The worldwide launches of Windows 7, Exchange Server 2010 and Windows Server 2008 R2 are exciting milestones for Microsoft, our partners, and customers. We are pleased by the early positive response we are receiving for these products."
Microsoft is also gearing up in its internet business sector for one final rally against Google. While it may be Microsoft's last chance to catch the internet search giant, with its new alliance with Yahoo it stands the chance of gaining enough marketshare to truly compete with Google at last.
Microsoft's Xbox 360 also has continued to be a lesser, but strong contributor to Microsoft's financials. In September, the majority of gaming expenditures went for the Xbox 360 console, despite it trailing the PS3 and Wii in console sales. This is thanks, in part, to the platform's terrific software-attach rate. Microsoft hopes to boost its hardware profits even more, by locking out third party memory sticks with an upcoming firmware update, forcing Xbox fans to use its more expensive memory sticks or turn to work-arounds.
Looking forward, Microsoft will launch new versions of Office and Sharepoint Server in the first quarter of 2010. It is also reportedly may launch new Microsoft-branded Windows Mobile 7 smart phones designed by Danger and codenamed "Pink", as well as its Courier tablet, sometime next year.
quote: Win7 Will be big.. Win7 is very corporate friendly. Much more polished than win vista. What this means is that Machines will be sold with win7, which means ALOT of implementation. Dell, HP, Intel, AMD, etc will sell product. For my field, and i am sure many of the DailyTech people, this will translate into increase work/jobs/REVENUE.. Much needed infusion in my opinion..
quote: Microsoft hopes to boost its hardware profits even more, by locking out third party memory sticks with an upcoming firmware update, forcing Xbox fans to use its more expensive memory sticks or turn to work-arounds.
quote: but Win7's success is still essential
quote: plus offer free installation for these Vista based machines.
quote: you even go me laughing