DailyTech - Microsoft Windows Sales Plunge 33 Percent as Company Looks Ahead to Win 8

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Software Microsoft Windows Sales Plunge 33 Percent as Company Looks Ahead to Win 8
Jason Mick (Blog) - October 19, 2012 12:21 PM

80 comment(s) - last by Ammohunt.. on Oct 22 at 10:58 PM

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 (MSFT) earnings 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."

_{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.

_{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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Windows 8 UI

By johndiii on 10/19/2012 10:16:59 PM , Rating: 2

As I work in the corporate IT world largely in Active Directory Environments, Windows 8 has a lot of great performance enhancements and features centered around manageability. Assuming that they all work right. I have to admit, though, that the interface is clunky and stupid. I still think most people will eventually get used to it if they have to. My big problems with Windows 8 as I have been running the RTM from technet since it was released there in mid-August, is the requirement for everything to have a Microsoft account. I can't set up the Windows 8 mail client to use its built in Microsoft exchange support unless I first provide a Microsoft e-mail account. As an aside, the "metro" version of the music app does not connect to a Windows Homegroup for music streaming, you have to use Windows Media Player in the desktop. All the way around it's just the little things that it appears MS didn't pay attention to that are the most annoying. Why do have 2 version of Internet Explorer 10? Why do we have 2 different Media player apps, one for "Metro" and one for the Desktop? Why can't I play solitaire without signing into an Xbox Live account? None of these things are huge issues. They're just stupid. I will be sticking with Windows 7 also until MS decides to let me use my OS without a Microsoft account. Even Apple will let you install OSX without giving the OS an Apple ID. You just can't use the App Store or the iTunes store. So what? I think Microsoft tried to "out Apple Apple" and they're going to fall on their face because they didn't do their due diligence on many of these little issues that make the OS seem ready to go.

"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings