Microsoft: Strong Windows demand helps earnings
Microsoft said strong demand for Windows and Xbox buoyed the company's financial results in the past quarter.
The software maker said Friday that it earned $3.57 billion, or 40 cents per share, on revenue of $12.92 billion for its fiscal first quarter, which ended September 30. Microsoft also deferred $1.47 billion in revenue ahead of the launch of Windows 7. Adding that back in, revenue would have been $14.39 billion and per-share earnings would have been 52 cents.
Those results topped forecasts, although sales are still down from a year ago.
"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," Chief Financial Officer Chris Liddell said in a statement. "We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."
Chris Lidell,
Microsoft CFO
On the Windows front, Microsoft saw the number of PCs shipping with Windows grow 6 percent in the quarter even though PC sales overall were anywhere from flat to up 2 percent. Microsoft cited, among other reasons, the fact that more Netbooks are using Windows compared with a year ago.
Overall demand for Windows was strong, the company said, with the software seeing its highest first-quarter unit sales ever and September being the strongest overall unit sales in the company's history.
The company sold 2.1 million Xbox consoles in the quarter, according to a PowerPoint chart posted on Microsoft's investor Web site. That's just slightly down from the 2.2 million units sold in the same quarter a year ago, but up from the 1.2 million consoles sold in the previous quarter.
In a conference call, Liddell said that the company sees the economy remaining tough during the current fiscal year, but noted some potential for improvement.
The earnings report came a day after Microsoft launched Windows 7 and followed the disappointing previous quarter when the company reported weaker-than-expected results.
The company said Friday it is continuing to cut costs. In the current fiscal year, which runs through the end of June, Microsoft said it now expects operating expenses of $26.2 billion, a drop of $300 million from its prior forecast.
Microsoft normally releases its earnings in the afternoons, but it moved the report from Thursday afternoon so it wouldn't step on the toes of the Windows 7 launch.
The company continued to lose a significant amount in its online business, with the operating loss growing to $480 million from $321 million a year ago. Revenue for its online business, which includes Bing and MSN, dropped to $490 million from $520 million a year ago. However, Microsoft said it has seen a mid-single-digit increase in U.S. search revenue.
Looking ahead, Liddell said that Microsoft sees some signs that more businesses will buy new PCs starting next year, though the upgrade cycle will probably stretch over several years.
For the current fiscal year, Microsoft said it expects Windows sales to roughly reflect the PC market, while Office unit sales will lag. It expects its server unit to slightly outpace the overall market, while entertainment unit sale should be roughly flat. For its online business, Microsoft said it expects to outperform the broader market, excluding its MSN Internet access business.
Liddell said Microsoft continues to be hopeful that its search deal with Yahoo will gain needed regulatory approvals and be completed early in calendar year 2010. Liddell said to expect $100 million to $200 million in costs related to that deal, if it closes.
Here's a chart of last quarter's segment-by-segment results, though keep in mind that the Windows numbers are affected by the amount that Microsoft deferred because of the coming launch of Windows 7.
(Credit:
Microsoft)
Update at 6:45 a.m. PDT: More details added throughout.
Update at 7:55 a.m. PDT: Added details from conference call with analysts.
During her years at CNET News, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft. E-mail Ina. 
So sorry jeve sobs...7 is a BIG HIT. WOOT , WOOT !
a 50+% YoY income loss for Windows is "the best gain in decades"?
May want to read those numbers up there...
SL can't be dethroned because it was never "throned" in the first place.
Considering Microsoft hasn't been selling Windows 7 until yesterday, those figures won't include any Win7 sales whatsoever. Even MSFT is shifting the pre-order sales figures from that quarter to the next to get a true reflection of sales.
I think you should hold off on your criticism until either this time next year or even at the end of next quarter. If your logic follows, then Microsoft should lost half of their income in the coming year.
I know you want to skew the numbers as much as you can, but really now.... Let's be fair here.
That is the question.
...they won't count EA/SA sales of Windows 7 either if that's the case (They have been selling Windows 7 licenses to EA and SA clients since August 9th, IIRC).
Thing is, unless they're counting _all_ Windows sales since early September as 'pre-order sales of Windows 7', the numbers still show a massive YoY drop.
Correct, I think @shellcodes_coder meant to say it ran into hiding because (sorry for repeat) 7 is out and hot and shining and Snow is melting and leopard went into hiding.
Apparently, they lost revenue growth in the Business division (probably thanks to a falloff in EA/SA licenses), Online Services (MSN, Bing, et al), and there's a bit of a loss in the Entertainment and Devices (Zune, Xbox) division.
And, contrary to Ballmer's crowing, Windows' YoY income is still down this go 'round - by half! Racing to the bottom (e.g. the xp netbook licensing thing) is no way to run a business long-term. They claim increased Windows sales, but are still making way less money at it. 6% over last quarter isn't going to get them out of that YoY hole...
(...so, did they re-arrange something? They don't say... but there's still that over-50% YoY drop, and no one called them on it?)
If I'm missing something here Ina, please fill me in.
Consider: the "disastrous" performance Microsoft had last quarter was already better than Apple's "best ever" quarter in terms of both revenue and actual profit. That's right, Microsoft in its worst quarter still made more money than Apple. And this quarter Microsoft easily beat expectations -- even with deferred income.
This is a strong report from Microsoft. The only disappointment continues to be the online division; hence they're spending investments in Bing to try to correct that.
I do believe your interpretation of the numbers may be somewhat suspect ... biased?
I find it interesting that you are calling these numbers a failure when industry analysts- you know, the people who are paid to do this sort of analysis for a living and don't get paid unless they actually know what they are doing...- have completely different views on the same data. I have looked at CNN, NYTimes, and AP and they all have stories from leading analysts that differ from your interpretation.
Now then it's possible they are all wrong and you're the only one smart enough here to see the what you see. If that is indeed the case- you're in the wrong job and should be giving investors and companies fiscal advice since you know more than the experts. You could be making some serious cash here.
It's also possible that you're just seeing what you want to see because of your past biased history.
Let's see what other readers have to say.
Learn some manners.
"Ina mentioned several times that Windows income for this quarter is partly deferred due to Windows 7 launch."
... ~$1.5bn of deferments? You're going to have to come up with a better explanation than that.
"Consider: the "disastrous" performance Microsoft had last quarter was already better than Apple's "best ever" quarter in terms of both revenue and actual profit."
One of the two grew - and the other contracted very badly. You keep forgetting that part for some odd reason... the analysts aren't, however.
==
"I do believe your interpretation of the numbers may be somewhat suspect ... biased? "
Just asking an honest (but one hell of an obvious) question. In all that hand-waving of the earnings call, I'm surprised that no one offered a decent layman's explanation that could _plausibly_ cover the whole wad.
Here - I'll spell it out for you. Deferring Windows income explains some of the diff, sure - but nothing near to explaining all of it. The closest they can hope to come is that they counted ALL of last month's Windows sales as Windows 7 sales (which they can get away with due to their licensing structure, and last month is roughly when they began to offer pre-sales).
Assuming such, at best that accounts for only 1 month's earnings... now what of the other two months (that is, a theoretical 66% of the ~$1.5bn difference, or about ~$1bn or so) that couldn't be counted as Windows 7 sales, at least outside of SA/EA agreements? You don't just stash a billion dollars under the rug.
Now if their next quarter's report shows this quarter's diff on top of any expected growth, then okay... but I doubt that will happen. You can only jiggle the numbers so much before they become unbelievable.
Now this is all assuming that the "deferments" account for the discrepancy, but I contend that they do not. Long story short - there's still a YoY loss sitting in there, no matter the volume of smoke and mirrors used to disguise it.
"I find it interesting that you are calling these numbers a failure when industry analysts..."
...few of who have actually weighed in on it, and those who have are also calling it a profit loss:
http://www.marketwatch.com/story/microsoft-profit-falls-18-but-tops-expectations-2009-10-23
http://www.redorbit.com/news/technology/1774287/microsoft_reports_profit_decline/
The best they can state is the Microsoft beat expectations. In layman's terms, that's like Thomas Andrews saying that his ship was discovered to be sinking slower than he expected it to at first (Google it ;) ).
Learn to read:
"Microsoft also deferred $1.47 billion in revenue ahead of the launch of Windows 7. Adding that back in, revenue would have been $14.39 billion and per-share earnings would have been 52 cents."
"Learn some manners"
A bit sensitive, aren't we? You've had quite a checkered past with being polite so you've got hardly a leg to stand on there. True, you've mellowed out since your Penguinisto days, so that's a positive step forward.
Looks like the sources you listed are somewhat undecided what to make of the report. I see those analysts, then others from articles on CNN and AP who think differently. I guess that's what makes this such an interesting game to play- nobody really knows and you have to pay someone else to make educated guesses- but in the end, that's all they are.
I know what they claimed, but it still does not add up, as explained above repeatedly. Are you going to claim that ALL Windows client sales for the past 1/2 quarter (or more) are Windows 7 sales? Because that's what Microsoft is doing if they insist on asserting that deferment for that reason.
==
"A bit sensitive, aren't we?"
It's a gentle reminder to not act a boor, so your armchair psychoanalysis may fall a bit short. ;)
I don't think Apple is shaking in their boots or anything.
Could you please direct us to the place where Snow Leopard was crowned?
Thank you.
There's room for both Apple and Microsoft in the world. You *can* own both and use both. There is no need to be so divided.
Apple does both software and hardware they control every part of the creation of their macs and other software/products it's called a vertical monopoly.
@everyone else
these apple, microsoft, linux is better flame wars a frankly quite pointless they each have their strengths and weaknesses macs are good for artistic things and IMHO better for people who just want to get to their email and surf the web, linux is good for cooperate backbone systems, government agancys, and tinkerers/programmers, and windows is good for gaming and general purpose use like day-to-day work and for the not so technically savvy people
Sorry to chime in so late, here, but I actually do work for a living. Today, like most days, I used both Windows XP and OS X. I own both and know that that are both very capable OS that can accomplish any task that is computable.
I don't have any experience with W7, but from the reviews I've read, it looks great. If I were to buy a PC today, I would want W7 on it.
But for you and the others like AppleSuxLeo who are predicting the demise of Apple because of W7, I can confidently day that you are absolutely, without a shadow of a doubt, wrong. Here is absolute proof that Apple has a long and healthy life ahead of it: The Microsoft Store.
I have a 15" MBP I bought a year ago that I like very much. It has some great hardware features that make it a pleasure to use: multi-touch trackpad, backlit-keyboard, auto-adjusting backlit display, long battery life, etc.I know that these features are not exclusive to Apple, so I decided to check out the new Windows machines to see how they compare. I've been reading a lot about MS's imminent launch of their store and I saw yesterday that they surprised everyone with an online store. Where better to check out the launch of W7 capable hardware?
So off I went to the new MS online store. I decide to look at laptops: let's go high-end to compare with my premium MPB. The top of the line is a Lenovo T400s: http://store.microsoft.com/microsoft/Lenovo-Think-Pad-T400s/product/F56F2689 for $1549
Check out this web page. Seriously. I went in wondering: How does this compare to my current MBP? Does it have the same features I love? Now, I'm not going to compare features between the machines, because that will just start flame wars or probably bore you. Just pay attention to my consumer experience. I start down the features: Processor: Intel 4500MHD/Core, SV Small FF, 25W. I'm used to thinking about cores and Ghz. So this is Greek to me. I make a mental note to Google that later. Run down the rest of the features, all bare-bones one liners, until I hit this gem: "For more technical specifications, please see manufacturer?s Web site." Huh? You didn't answer any of my questions yet. I hovered over that sentence because it doesn't look like a link, but I still have hope. No change in hovering. Click on it anyway. No reaction. You're kidding, right? Doesn't anyone in MS know what the HT in http means?
OK, off to the Lenovo site. I Google Lenovo and click the top link, obviously the company web site. Type in T400s into their search box: 5000: results. Hmm... Ok, I can narrow the search down to Products, that eliminates 3000 of the 5000 results. Now the top link looks like a product page: http://shop.lenovo.com/SEUILibrary/controller/e/web/LenovoPortal/en_US/catalog.workflow:category.details?current-catalog-id=12F0696583E04D86B9B79B0FEC01C087¤t-category-id=AEA4BB4495A04C098DBEA8EBB87059AC. There are 3 PCs featured, but none of them have the processor mentioned on the MS site. SOL. I'm not going to hunt through the other 2000 links.
So overall the MS site has the feel of a cheap ASP-based web site .I can picture the maintenance UI: Key a manufacturer and model in, upload a few thumbnails and one-line features into it, give the list price and the site automatically adds it to the page under the appropriate pricing category. (BTW the filters on the home page don't work). Surf around the various PCs: they all have exactly the same format with slightly different wording.
(to be continued)...
Back to the Windows Store. Click on the Windows link on the top of the screen and select Windows 7. See the page that shows you a page with 10 pictures of Software boxes, one for each version of W7, each with 2 or 3 bullet points of description, each of which has more more than 7 words in them. No pictures of the actual product in action. Click on Compare editions: The new page has images of software boxes, with a bunch of bullet points show what is in each edition. The bullet points offer such exquisite details as: "Makes the things you do every day easier with improved desktop navigation" I guess maybe that includes my multi-touch trackpad? But does it need hardware support? I still can't tell.
And so , my dear MS fanboy/trolls, that is exactly why Apple will not be going away any time soon. Both companies develop compelling, quality products, but MS could not market raw meat to a pack of starving dogs.
When I first looked at this web site, I started to laugh, but then I felt guilty. It is so incredibly, pathetically lame and amateurish, it doesn't seem right to laugh at it. I've seen better pitches on Craigslist. Mr. Ballmer, if this represents your best efforts into retail, please do the MSFT shareholders a favor and bring it to a halt before more $ are uninated away.
Apple has designed a nice webpage. But I asked myself this question:"do I need to read all descriptions of every features that are installed on Windows or macOS?" No! All I need is the main features.
Mac doesnt get virus, secured, up-to-date, bornReady, Instant Wireless. what?? every OS is up-to-date. All OSs have holes and get viruses. Win7, it picks up wireless right away. BornReady?? ARe you kidding me?? You could get basic driver function on OXS. However, when it comes down to advanced functions, you must need 3rd party drivers. Not many driver makers are supported Mac platform and you should know it.
I do have to agree on the Magic Mouse though. Reviews are not favorable on this. One reviewer at CNET called it ergonically horrible and painful to use. That's not the sort of thing you want to have a high end mouse known for. Thankfully Apple hasn't limited you to using only their mice and there's a ton of USB mice out there that can do the job quite well. Logitech seems to have the popular choice currently for Mac mice options.
Sorry, I disagree with you, $29 does not justify cost of SP even if it is for just the box, I feel it is too much.
Your FUD did not work Apple.
"Nice spin..."
Yes, I agree, you did spin that one nicely. Now let's add the * to your comments.
"Nice spin... considering their revenue was down 14% and profits sank 18%. " *
* - Windows 7 was not available during this quarter and sales figures for the new operating system are not incuded.
"sure ms had another poor quarter.. but it will be better next time" would have been more fitting given the context of this article.
There is no doubt MS will do MUCH better next quarter.. They haven't issued a relevant OS in years... Consumers have wanted more for some time now.. and MS is finally delivering right before a Holiday season.
Loving everything they demonstrated.
Google for Intel's "Canmore" chip. You may not even need a separate box to do any of that before long... just do it off your TV.
Thing is, we all know who owns the embedded space - and it ain't Windows.
Why does it matter to you?
I don't use my Windows systems for media center use, though I have in the past. There's too many set top boxes now as it is, so I've settled on just using my Tivo instead. I'd like to have an all in one solution, but nobody- NOBODY and that includes Apple, Microsoft, or any linux offerings currently can do what I want them to.
My television certainly can't do any of this.
How... defensive of you. ;)
FWIW, Apple TV faces the same threat - that the television makers will end up doing it all for the user, and that the budding 'media" PC will end up as little more than glorified storage.
"I'd like to have an all in one solution, but nobody- NOBODY and that includes Apple, Microsoft, or any linux offerings currently can do what I want them to."
Hence my request to google for the Canmore project. Here, you can start with this: http://www.eetasia.com/ART_8800540665_499488_NP_68f7d97e.HTM
The whole thing can fit in a television, and does pretty much everything you described. Given a near-universal hatred of unnecessary licensing costs, it will most likely run on embedded Linux (much like your TiVO box does now). It can do pretty much everything you mentioned and then some.
==
"He must be a paid Mac/OSX evangelist"
Ah, yes - Apple pays me billions to run a campaign of terror, and... heh - sorry, couldn't continue that one with a straight face. ;)
Amazon stock is off the hook !
It doesn't matter a bit. The stock market is not a good way to judge the success of a company's product. The fluctuations of stock day to day just don't make that a reliable measure. Looking over 10 years or so is a much better way to get a feel for a company's position in the market.
Apple, Microsoft and Amazon all have done well in the 10 year plan.
Just say...Widows 7 or Android ! Or BOTH.
They are laughing in Japan, btw...
http://macdailynews.com/index.php/weblog/comments/22825/
;)
And Nokia is laughing at Apple... with a lawsuit for violating ten of their patents on cell phone hardware.
You know what? I'm not laughing.
Nokia will not get what they are looking for... and if history repeats itself.. this lawsuit is going to turn around and bite Nokia in the arse.
Odds are excellent that Nokia was caught violating something Apple patented, so Nokia decided to make some noise in order to push negotiations of a cross-licensing deal.
Meanwhile, the last big patent fight Apple faced was with Creative over something in the iPod. Microsoft had to pay out $60m for a lawsuit they lost with that same patent. Apple settled theirs for $10m, and Creative was pretty much reduced to making iPod accessories to help their income.
Not seeing Nokia making much more headway.
You need some better lies Random_Walk Apple paid 100 Million to creative for stealing technology.
As for Nokia veruss Apple- considering Nokia's dominance in the world market, this isn't something that Apple can just ignore and hope goes away. Yes, it's likely they will settle and just pay some amount to license the technology, but if Nokia really wanted to do it, they could hurt Apple very very badly. But realistically that's just not something you do even to your direct competitor in the business. That hurts your own position and reputation for doing it.
Time will tell.
Ouch ! Sux to be Apple lately.
While today's one day pop of MSFT is welcomed, I can assure you that as a longtime shareholder, they have a *long* way to go to match AAPL's performance over the past five years.
I do wish Apple would pay their stock holders dividends like other tech companies do instead of taking that huge pile of cash they have and sit on it instead of investing it. The ROI isn't very good there. :/
But then I'm not a stock holder so what I think doesn't really count for much.
I understand your feeling CRAPple sucks anyway. Don't worry soon it will come tumbling down to 1.2% and it may make you happy as this is the real value (I still think 1.2% too much).
Tell you what- how about you don't worry about what Microsoft's stock value is and concentrate on Apple's? Isn't that all that really matters?
http://www.youtube.com/watch?v=DbJGzyYV_X8
I am sure you must have watched this.
http://www.youtube.com/watch?v=KsKKQNZG3rE
Any comments?
Now you can safely change your title The_Very_Unhappy_Switcher_And_Now_I_Am_Getting_Windows_7
It fails again!
and this is after it was fixed!..
http://www.youtube.com/watch?v=Q_gkLVwMAW8&feature=response_watch
Microsoft is still the 900-lb gorilla in the OS market. They have the government/enterprise markets sewed up, and will continue that way for years to come. With the investment these markets have in hardware and proprietary, custom-built software, Microsoft has them by the nads because it just doesn't make sense financially for them to switch to anything else. The consumer market, where people actually have a choice of what they buy, is another story. Apple profits up 46% and best Mac sales ever for the last quarter. What does that tell you???
It would be interesting to know exactly how many of the 90% of present Windows users are going to 7 because they WANT to, and how are going because they HAVE to.
Nobody *has* to go to Win7. That's up to the end user or company who buys it. It's their choice.
Hint: If you want to convey that you actually know what you're talking about, you can start with the knowledge that the words "enterprise" and "shortly" never belong in the same sentence.
Hint #2: The "enterprise" already has licensed and paid-up access to Windows 7, and has had it since August; their EA/SA contracts didn't rise in cost for this, so your statement is completely wrong in that regard.
Funny thing, but the last time my company upgraded the OS, I don't remember having a vote.
Clueless. That's the first word that comes to mind when I read comments of yours like this.
Hint #1) Enterprise largely skipped Vista- I think you probably noticed that by now- but if not, go back and read through CNET archives. Will they be skipping Win 7? No, they will be going with Win 7, a *new* license entirely.
All those licenses they had with XP won't apply to Win 7 so they will be buying new ones. That's new revenue.
Hint #2) See #1.
But you're right- I don't know what I'm talking about. I can only go with what I read. If the information provided to me is wrong, then I'll be wrong as well.
Here - read it for yourself: http://www.microsoft.com/licensing/licensing-options/enterprise.aspx#tab=2
"I don't know what I'm talking about."
We'll leave it at that.
Fact is, there will be no surge among EA/SA for Windows 7 because any surge in income for Microsoft under those licenses requires business growth (new computers), not versioning (new products). That's the whole point.
So unless you all are predicting a massive growth in new Windows-using enterprises, or massive growth in the enterprise overall, Microsoft will see no big enterprise surge of money from Windows 7's launch - at all.
Those who want to stick with a 32 bit home edition on a new pc, either need to own an OEM CD, or have to go 7.
And people running Vista are running to win7, as only home Windows alternative!
[CNET editors' note: Profanity deleted]
That Vista sucks and XP and Win7 is better?
If so, CNET Editors spew out a lot more profanity!
Just say ...Windows 7 and/or Android !
"Steve Jobs' health"
"Subpeona"
Come to think of it, those largely apply to any tech company these days. :/
- by corelogik October 23, 2009 12:41 PM PDT
- I find it funny, sad and mostly childish how people are still turning the Apple vs. Microsoft thing into some sort of religious war.
- Like this Reply to this comment
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- by Vegaman_Dan October 23, 2009 1:30 PM PDT
- You obviously don't understand the underyling principle here. It's not whether or not Apple is better than Microsoft, it's a basis of existances. My day will not be complete unless I can prove beyond a shadow of a doubt that my Mac is better than Windows because my Dodge is better than your Ford or Chevy that hauls only proper Coke products (Pepsi users are losers!) in the back as I head to that Redskins game to beat the Cowboys even as I know that red is better than green.
- Like this
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Showing 1 of 2 pages (103 Comments)I own several Mac's and a couple of Windows machines. I run OS 10.4 and 10.5 on the Mac's and Windows Vista on the PC's. I don't see the issues that people see with either. I have to wonder what people are doing or what kind of odd system configurations they must have to elicit such strange issues.
I also have to add that both Microsoft and Apple have more money than anyone commenting here will ever see in their lifetime.
Grow up a little, or a lot as the case may be for your individual circumstances, and use what works best for you. Who gives a damn what you or someone else likes or uses. If any of you were experts worth listening to, you would be writing articles, and getting paid to do so, instead of commenting on them. I include myself in that category by the way. I am no expert though I know quite a bit about working with Windows and Apple. I am just one man, with one opinion, who is laughing his ass off at the childish school yard antics being displayed in this and every other article that mentions Microsoft or Apple.
Thank you for the LOLZ.
See? It's simple.