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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 Labotomizer on 10/20/2012 7:30:50 AM , Rating: 5
Severely lacking in forward thinking.

You need to understand the trends and the way computing is going in general and then, perhaps, it will make sense. The funny thing is having two options is exactly what you have in Windows 8. The desktop is still there. It still works like it did it Windows 95 through 7. Are you really saying the lack of a little glowing orb in the bottom left has changed the desktop that drastically? How can you be so small minded? The Start Screen functions EXACTLY like the Start Menu, only you have larger choices, more information, etc. And since, like I did with Windows 7, I have my desktop icons turned off on Windows 8 and all my high usage apps pinned to the start menu, I see the start screen a couple times a day at most. And usually it involves hitting the Windows Key on the keyboard, which has always been the more efficient way of acccessing the start menu, and typing "cmd", right click, Run as Administrator. And occasionally to get to the Hyper V manager and some control panel settings. All of which are done through search. In no way is it slower than the previous way.

But back to the forward thinking. Mobile device processing power is advancing in leaps and bounds. By the time Windows 9 is in full swing, say ~4 years from now, it's unlikely the vast majority of users will even buy a PC anymore. You'll buy a dock for your phone or tablet that may have additional storage and processing power. Perhaps even an external GPU. You'll connect that to your monitor/TV/Keyboard and Mouse. When you're using that you'll have access to all your mobile apps via the new UI and access to all your legacy stuff with the old desktop.

Especially if Intel has its way and it really takes off on x86 highly mobile chips. Their architecture is already setup in such a way that they could accomplish this today with Thunderbolt. Guess what we're missing though. A UI that can bridge the gap between mobile/touch screen and desktop. That's why Windows 8 is what it is. I can't believe so few people lack the mental processing power to understand such a basic concept. How is the current UI holding us back? By not allowing us to have a truely mobile device that can also be a true production powerhouse when needed.


By Labotomizer on 10/20/2012 7:32:23 AM , Rating: 2
Wish we had edit - I have them pinned to the task bar. Not the start menu.


By Reclaimer77 on 10/20/2012 9:29:02 AM , Rating: 2
quote:
But back to the forward thinking. Mobile device processing power is advancing in leaps and bounds. By the time Windows 9 is in full swing, say ~4 years from now, it's unlikely the vast majority of users will even buy a PC anymore. You'll buy a dock for your phone or tablet that may have additional storage and processing power. Perhaps even an external GPU. You'll connect that to your monitor/TV/Keyboard and Mouse. When you're using that you'll have access to all your mobile apps via the new UI and access to all your legacy stuff with the old desktop.


I bet you a thousand dollars, straight up, that this won't be a reality by the time Windows 9 (or whatever comes after 8) hits the market.

There's "forward thinking" and there's just wild unrealistic predictions. PC's aren't just going away, certainly not that soon.


By delphinus100 on 10/20/2012 1:23:18 PM , Rating: 2
Indeed. It isn't all a matter of processing power. For those who want to do something productive, and not just consume media, there are certain ergonomic issues that push you back to something that at least looks like a PC on a (literal) desktop, and also don't lend themselves to tablets/smartphones, or assume (or even require) continuous broadband Internet connections.


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