Microsoft is the largest software company in the
world and there is little to indicate that it will cease being the biggest
gorilla in the cage anytime soon. Although profits at Microsoft were up
and were greater than Wall Street expected, the company has seen its stock
plummet and sales of its Windows operating systems are sagging.
Microsoft offered up the financial
details for its latest quarter yesterday. According to the numbers,
Microsoft's Windows division saw sales of Windows 7 OS slide. This is
attributed in part to the sagging PC sales that were down 1% in the same three
month time period compared to a year ago. When PC sales sag, so do sales of
Windows since the vast majority of PCs shipped run Windows in some flavor.
At the same time, some of the blame for sagging
Windows sales and slowing PC sales is attributed the popularity of other
gadgets and devices like the iPad. The iPad and other tablets are encroaching
on the PC market in a noticeable way and many feel that trend will only
As a result of Windows losing momentum in the
marketplace and uncertainty of PC sales Microsoft has seen its stock
price fall 1.2% to $26.37 in trading reports Reuters.
Capital Advisors Growth fund Channing Smith said,
"Microsoft to me is no longer a growth stock, but it is a very attractive
value stock. They continue to generate tremendous free cash flow. Their balance
sheet is really unmatched." He continued, "What you will begin to see
is a shift away from growth investors. You are seeing that transition where
Microsoft is in no man's land, but I think they will become increasingly more
attractive to value investors."
Over the last year, Microsoft's stock has lost 14%
compared with an overall growth of 16% for the Nasdaq. While Windows slipped,
other segments of Microsoft's business did well and took up the slack. Overall,
net profit at Microsoft was up 31% in fiscal Q3 to $5.2 billion amounting to 61
cents per share. After excluding the tax benefit Microsoft profits still met
Standouts for the quarter included the Office Division
which saw a 21% increase in sales to $5.2 billion, and the Entertainment and
Devices Division relied on the Xbox 360 and Kinect to rack up $1.9 billion in
The much talked about deal for Bing to provide
search results on Yahoo is still not performing as Microsoft had hoped with the
division posting a loss of $726 million.
quote: The problem is that Microsoft has been trying to restructure since the 1990s
quote: And all have failed as businesses initiatives.
quote: What they do now hardly matters at all. Windows 8? Yawn. WP7? Snooze.
quote: quote:The problem is that Microsoft has been trying to restructure since the 1990sActually Microsoft has been trying to diversify since the 1990's, not restructure. Their is a difference.quote:And all have failed as businesses initiatives.Negative, not all.Microsoft's entertainment division has seen fantastic growth over the last few years, namely because of the Xbox 360.quote:What they do now hardly matters at all. Windows 8? Yawn. WP7? Snooze.Windows 8? It's coming to the ARM architecture, that's a big one. Suddenly we will get fairly full-featured desktops on systems that use a negligible amount of power... Think: HTPC's, File servers the works.Should be interesting how backwards compatibility turns out.Then you have Windows phone 7... Personally I love the OS, the interface feels incredibly smooth and responsive, give it time to gestate with Nokia before we see how it turns out in regards to apps and support.
quote: The Xbox is a perfect example of the point I was making, which is that for all their efforts Microsoft has failed to develop any important new streams of profitability to reduce their dependency on their ageing cash cows of Windows and Office. For all the numbers of Xbox sold MS have made very little money, they spent billions to make millions