Microsoft Windows Sales Plunge 33 Percent as Company Looks Ahead to Win 8
October 19, 2012 12:21 PM
comment(s) - last by
Q1 2013 likely left Microsoft's Ballmer sweaty and frustrated.
Some divisions profit, but Microsoft faces uncertainty as it races ahead to Windows/Windows Phone 8
Earnings week for the tech industry has brought
, with a few pleasant surprises (
)). Microsoft Corp.'s (
definitely fall into the "bad news" category.
Microsoft, which operates two fiscal quarters ahead of the calendar quarter, saw itself narrowly miss
in both revenue and net income (profit). The company pulled in $4.47B USD (expected: $4.72B USD) in profit on revenue of $16.008 USD (expected: $16.416B USD).
A key to the miss was plunging revenue from the Windows unit, which saw a big drop in Windows 7 sales. Microsoft better hope that predictions of Windows 7 being the "
next Windows XP
" aren't true, because it's counting on Windows 8 to revive sales, with movement of the
once-sterling Windows 7
slowing to a sluggish pace.
Steve Ballmer, chief executive officer at Microsoft,
roared at his critics
, commenting in the earnings release, "The launch of Windows 8 is the beginning of a new era at Microsoft. Investments we’ve made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners."
Microsoft is currently selling Windows 8 upgrades via pre-order.
Microsoft did defer $1.36B USD (as it typically does) in pre-order revenue from its
Windows Upgrade Offer
program. Windows 8 official
launches next Friday
on Oct. 26.
One bright spot in the earnings report was Microsoft's servers unit, which saw an 8 percent bump on revenue, mainly on big growth in SQL Server and System Center. And in the also-somewhat-good news category, Bing and the online service division crept a bit closer to no longer being
massive money losers
, with revenue 9%, driven by a 15% increase in revenue per-click. That's particularly good as the dominant force in the search market, Google Inc. (
in revenue per-click
after traffic acquisition costs (TAC).
The Entertainment and Devices division earnings were a revenue draw (down 1 percent). It is currently focused on reviving Microsoft's smartphone bid with
Windows Phone 8
, which launches next week. It also was able to brag that the Xbox 360 remains
sales king of the American consoles market
, with a 49 percent estimated market share. The Xbox 360's successor, which some are expecting to be
named the Xbox 720
, is not expected to land until sometime in late 2013 or early 2014.
Windows Phone 8 launches next week. [Images: Nokia (left), HTC (right)]
Microsoft remains one of the best earning and most successfully diversified hardware/software giants in the consumer electronics industry. However, it continues to be defined by the burden of high expectations, speculation, and intense scrutiny surroundings its "misses".
Shares of Microsoft were hammered in morning trading, down almost 3 percent to $28.70 USD/share.
FT [analyst estimates]
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Not really a 33% drop
10/19/2012 1:02:35 PM
Since I think they had to defer all the WIn 8 revenue until it ships, I assume that typically Windows 7 licenses sold to OEMs would have been included in the quarter's sales figures, while as Windows 8 isn't available, they have to defer those license sales until next quarter, which means it's not a 33% real term decline (hence the non-GAAP consolidation), but a 33% decline in Windows license sales which can be attributed to the quarter, as all the Windows 8 pre-sales can't be included.
A 33% drop would therefore indicates that there are a lot of Windows 8 sales which have replaced Windows 7 sales, although some of the drop will be due to the decline in shipments, so OEMs at least don't seem to be holding on to Windows 7 forever.
Also Windows 7 is likely to remain as the main OS in enterprise mainly because it takes a while to transition, and people will have spent time preparing for a mature Windows 7, and won't want to move to an immature Windows 8, so in terms of timing, Windows 8 will probably miss the boat anyway, and not be that helpful (in terms of the major change - UI) for enterprise anyway, so Microsoft probably won't be too fussed if enterprise sticks with Windows 7.
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