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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 JohnWPB on 10/19/2012 10:57:54 PM , Rating: 2
"They got it right the first time, there's no need for a flashy gimmick that doesn't add any value."

I love it, you hit the nail on the head Argon18. Like what you and others have said, why change something that has worked for quite a while now. Personally, I think the answer to that question can be answered by MS wanting more of our money to by newer OS's. Their not gonna make a lot of money by making changes in their updates, so they bring in some gimmicks that "some" people will like, but the vast majority will NOT like.

I wonder what all these people who run businesses are thinking of with Win8 coming out. A lot of them were not happy to re-educate their workers when Win7 came out, so what does MS do...... well they bring out Win8 and make everyone learn a new way of doing things, just so some of the guys on here can say "wow, you guys want to stay in the dark ages for ever?"

Well guys, if it has worked so good, and no one threw a hairy cause they didn't have a touch screen OS, why the heck did MS change it. I will say it again...... they want you to buy their new OS ( whether it is better or not ), just so they can get in your wallet!

Thanks MS, but NO thanks!

By MrBungle123 on 10/20/2012 12:11:34 AM , Rating: 2
I think you're not exactly right about Windows 8.

MS is making Win 8 what it is not so they can sell a bunch of OS licenses (yes thats part of it) but the main motivation is to push the Windows App Store. By forcing Metro on all the entire windows user base they get the "critical mass" of users necessary to get developers interested in the OS and making Apps so that there is a viable software ecosystem under the new Metro paradigm. That is why there is no choice, that is why the keep ignoring users, they know that if all they did was release something like Win RT that it would flop because it will have no software. So they cram Metro down your throat, devs make touch based Metro apps because there are millions of Win 8 PCs and MS gets a 30% cut of every app sold on their app store. This is a calculated risk, they're betting they can leverage the entire windows install base to get this off the ground and if it flops they probably won't lose the enterprise market with only one bad windows release (think Vista) and they can correct their course with Win 9 if it all goes south.

By TakinYourPoints on 10/21/2012 4:53:32 PM , Rating: 2
^^^ Gets it

"If a man really wants to make a million dollars, the best way would be to start his own religion." -- Scientology founder L. Ron. Hubbard

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