Print 54 comment(s) - last by Smilin.. on May 2 at 1:21 PM

Eroding Windows sales is hurting the stock price at Microsoft

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 grow.

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 analyst expectations.

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 sales.

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.

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By Tony Swash on 4/30/2011 6:31:26 PM , Rating: 2
The problem is that Microsoft has been trying to restructure since the 1990s

Actually Microsoft has been trying to diversify since the 1990's, not restructure. Their is a difference.

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.

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.

Diversify - restructure - semantics. I used restructure because that was the word used in the comment that I responding to.

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.

As for Widows on ARM that will mean nothing unless MS utterly rewrite the OS to optimise it for touch (and that does not mean any sort of 'skin' it means a fundamental rewrite) and if they do such a deep rewrite it will not be backwardly compatible (how could it - the old Windows apps are not designed for touch). So to catch up in the tablet world MS needs to come out with a new OS that works really great straight off, somehow create an app ecosystem out of nothing and then get a diverse bunch of OEMs to come up with hardware that betters the likes of Apple. Pretty tough call in my opinion, especially given that whatever MS come up with will be going up against iPad3 or iPad4 and iOS5 and maybe iOS6. Good luck with that.

WP7. Still no sales figures being released - what does that tell you? Nokia - a collapsing business with collapsing sales. If it all goes incredibly well for MS with WP7 they might just end with 15% of the market (unlikely but just possible I suppose) and then so what? Even with 30% of the phone OS market how much money can MS make going up against a free OS and another OS making it's money on hardware? Even a super successful WP7 will simply not make much money for MS.

By Smilin on 5/2/2011 1:05:05 PM , Rating: 2
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

Sorry but XBL Gold subscriptions alone pull in 1.3bn per year. The original Xbox lost money but the 360 was profitable through XBL and licensing almost immediately..even back when the hardware *was* sold at a loss. You have a very strange definition of failure, Tony.

Sharepoint is a billion dollar business all by itself.
SQL is unstopable, Exchange, Lync, TMG, blah blah.

Look, you're just talking out your sss.

PC sales drop 8% yet MSFT posts a 31% increase in profit...'nuff said.

"My sex life is pretty good" -- Steve Jobs' random musings during the 2010 D8 conference
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