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Q1 2013 likely left Microsoft's Ballmer sweaty and frustrated.  (Source: YouTube)
Some divisions profit, but Microsoft faces uncertainty as it races ahead to Windows/Windows Phone 8

Earnings week for the tech industry has brought a lot of bad news, with a few pleasant surprises (like Intel Corp. (INTC)).  Microsoft Corp.'s (MSFTearnings definitely fall into the "bad news" category.

Microsoft, which operates two fiscal quarters ahead of the calendar quarter, saw itself narrowly miss analyst targets 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."

Windows 8 Upgarde
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. (GOOG), saw a large decrease 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.
HTC Windows Phone 8X
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.

Sources: Microsoft, FT [analyst estimates]



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Poor PR and marketing
By tayb on 10/19/2012 1:03:28 PM , Rating: 2
Microsoft deserves a lot of criticism for their poor PR and marketing on Windows 8. People are clueless on Windows 8, Metro, and Windows RT and in my opinion Microsoft has done almost NOTHING to combat it. The overwhelming opinion on Windows 8 is negative and a lot of the negativity is based on false information or false pre-conceived notions. (A lot of it is deserved as well, mind you) What has Microsoft done to address these concerns or false information floating out there? Even their BUILD conference left developers scratching their heads by some decisions that lacked explanation.

I expect Windows 8 to move a lot of copies simply because it's super cheap and will come pre-installed on virtually every desktop/notebook sold. If Microsoft can't manage the negativity, quickly fix design mistakes with Windows 8 (hello booting into the desktop?), and better educate the public (namely the techies) Windows 8 will go down with Vista as a "miss." Fortunately for Microsoft even if Windows 8 is a miss they'll still print money because they are well diversified.




RE: Poor PR and marketing
By Labotomizer on 10/19/2012 1:08:15 PM , Rating: 2
Even a "miss" with Windows 8 will lead to an ecosystem of ~250 million systems for RT apps. Which means there will be no lack of development for it. So if for that reason alone I'm not worried.

As for booting into the desktop, I don't see the big deal. Especially since I only boot when updates install once a month anyway, other than that it's sleep so it goes right back where I was.


RE: Poor PR and marketing
By tayb on 10/19/2012 1:28:04 PM , Rating: 3
Microsoft already has an existing ecosystem, Windows. Most software written today will run on XP, Vista, Windows 7, and Windows 8. I think your expectations for Metro apps are pretty optimistic. If I choose to develop with WinRT for Metro I give up a lot such as freedom to distribute, MS app approval, lost revenue to MS Store, and no compatibility with prior versions of Windows.

On Windows 8 why would I want to be running Metro apps? I have access to the entire Windows software catalog. What type of Metro app would I want to run? On Windows RT I don't have a choice, it will ONLY run Metro apps, but the Windows RT tablet market share is 0% at the moment. I'll watch the launch and see what happens the first few months but as of right now I don't see many compelling reasons to develop Metro apps.

Hell, I can't even develop a WinRT app unless I'm using Windows 8 because it won't run on anything BUT a version of Windows 8.


RE: Poor PR and marketing
By kattanna on 10/19/2012 2:13:05 PM , Rating: 2
I'm still of the opinion that windows RT is a mistake.

for most people they will assume it is simply a new version of windows and buy the device and once home will try to install their quicken or other such real windows apps and find that they willnt work. then take the device back as being defective.

they really should have called it anything else but windows. its going to cause confusion to the masses


RE: Poor PR and marketing
By Mint on 10/19/2012 2:31:31 PM , Rating: 2
I think Microsoft's biggest marketing failing is avoiding how to show users that the UI is better/faster 90% of the time even if you never touch any Win8 apps. Obviously this shouldn't be a national TV ad, as MS wants the Win8 market to succeed, but some web videos with side by side comparisons would quell a lot of the criticism.

If they advertised the quick access menu, the better task manager, how launching programs takes equal or fewer clicks with a customized start page, and that the whole notion of "leaving the desktop" is entirely psychological, I'm pretty sure these hardcore users wouldn't be so riled up.


RE: Poor PR and marketing
By Jeffk464 on 10/19/2012 4:43:05 PM , Rating: 2
With more and more computing moving to the cloud the underlying OS is becoming less important. If you do everything through chrome browser you have about the same experience on a mac, pc, linux, or chrome OS for that matter. Even if you don't like or can't use google docs, you can now do MS office in the cloud. Cloud computing can really make the compatibility factor of windows basically a non issue.


RE: Poor PR and marketing
By Spuke on 10/19/2012 7:13:30 PM , Rating: 2
See this is where my old man kicks in. :) I don't all or even most of my stuff on the cloud. I want an OS that helps manage my stuff that mostly local. I think the ChromeOS is stupid and is only good for web surfers.


RE: Poor PR and marketing
By Jeffk464 on 10/19/2012 4:47:37 PM , Rating: 2
Windows RT should allow for simpler, cheaper, longer battery life mini laptops and tablets. I personally think its a good idea. Having a wintel tablet automatically puts you behind price wise to an android/arm tablet.


RE: Poor PR and marketing
By Jeffk464 on 10/19/2012 4:38:55 PM , Rating: 2
I expect Windows 8 to move a lot of copies simply because it's super cheap and will come pre-installed on virtually every desktop/notebook sold.

I'm not so sure that win8 will be an automatic success like previous versions. The goal of win8 was to move into the growing tablet market. If MS can't convince people that win8 on a tablet is a better experience than iOS or android I think it will be considered a failure.


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