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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 MrBungle123 on 10/21/2012 12:39:43 AM , Rating: 2
Yes people griped about DOS > Win, but you forget that it was still DOS based. What they SHOULD be doing is taking Win7, and throwing Metro on top, just like the transition from DOS > WIN if they're looking to evaluate a new design. It took 4 versions of Windows to really get people over to a GUI from DOS, I don't expect people's mentality to change.

ummm... isn't that basically what Win 8 is? At its core its basically Win 7.5 except the UI has this extra layer of crap on top of it getting in your way all the time.

Windows offered some clear advantages over DOS that made the trouble of learning the new UI worth it... Multitasking, more intuitive file management, and a much shallower learning curve for new users are huge advantages. What does Metro offer that the desktop does not? Better multitasking? --nope multitasking functionality in a pure Metro environment is inferior to the desktop. Better file management? --nope, they send you back to the desktop to do that stuff. Shallower learning curve? --debatable, but 95% of the computing world already knows how to navigate windows... 100% of all windows users will have some growing pains adjusting to the new UI..

Lets face it, unless you're a touch user, its going to be a bunch of trouble learning a new UI so you can have inferior multitasking capability, an extra layer of stuff to click past to manage your files, and you gain very little beyond a new version of task manager and some more informative file copy dialogs...

Remember that fiasco with Office 2007? Look where 2010 went. Right back to 2003, except the file menu is now a shiny button instead. For all intents and purposes, there has been no change.

No, the ribon that most users dispised in 2007 is still there in 2010/2013. All this shows is that MS will do what they want no matter how much the userbase complains.

"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan

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