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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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By 91TTZ on 10/19/2012 4:00:43 PM , Rating: 5
Windows 8 looks good on tablets. I think the main concern that people have is that Microsoft is forcing that UI on the vast majority of the public that uses PCs. Microsoft has more than 90% of the PC market and now we're all expected to run a tablet-optimized OS on it? No thanks.

By Sazabi19 on 10/19/2012 4:09:49 PM , Rating: 4
Exactly! How hard would it be to have it bundled with a "regular" Windows 8 and then an option of installing a Windows 8 *Touch*. This would solve so many problems and get this UI out of my desktop environment. Though I still have a beef with my Start menu being taken away and the weird obtuse way of navigating the OS now. Everyone knows, if I press the "x" the window will close, it's universal and now they are going to rip that from under us? Move the window down all the way and it will close it? I do that sometimes to just move it out of the way for a second to look at something behind it but keep it the active window, this isn't helpful. Want to have several windows up and once and just bring 1 down to look at another with Metro? Too bad. No true multitasking for you.

By Jeffk464 on 10/19/2012 4:29:37 PM , Rating: 3
Yup, there should be two 100% compatible versions of windows, a metro version and a desktop version. Let people with PCs choose which one they want.

By marvdmartian on 10/22/2012 11:40:25 AM , Rating: 2
This. Don't know about anyone else, but I don't necessarily want to move away from Windows 7 right now, and having ONLY the choice of Windows 8 on a new computer might very well cause me to look in another direction.

Might be that Microsoft's actions will end up being a boon for Linux!

By Maiyr on 10/20/2012 9:52:19 AM , Rating: 2
Microsoft is forcing that UI on the vast majority of the public that uses PCs

This seems to be what a lot of people think, but I just do not get it. I have been using Win8 RP since it came out on my laptop and the only time I ever see Metro is when I decide to see it; which is mostly never. When my laptop boots or comes out of sleep it goes directly to the desktop. It does not go to Metro. I use my laptop the same way I did with Win7. Anyone that wants a start button can install this for free.

Metro does not have to be used at all. I can only think that folks that are saying Metro is an issue really just haven't even installed Win8.

To each their own, but I like the option of having a different "interface" available should I so choose to use it.


By augiem on 10/20/2012 3:53:18 PM , Rating: 2
Metro does not have to be used at all. I can only think that folks that are saying Metro is an issue really just haven't even installed Win8.

Blanket assumptions are almost always wrong. I've installed Windows 8 three different times during its development and could not stand the workflow. Just because it doesn't bother you doesn't mean it won't bother someone else.

By kitfox on 10/21/2012 9:45:24 PM , Rating: 2
I think you missed his point. With the apps we have now, metro is completely optional.

"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain

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