Microsoft's first quarter: A blowout
Updated 2:00 p.m.
Microsoft reported a strong jump in first quarter revenue and earnings on Thursday, as the company benefited from Windows Vista and the launch of Halo 3.
The software maker said it took in $4.29 billion in profits, or 45 cents per share, on revenue of $13.76 billion for the three months ending September 30. As for Vista, the company said it saw double-digit growth in multi-year agreements by businesses and saw "the vast majority" of consumers opting for a premium version of the operating system.
"This fiscal year is off to an outstanding start with the fastest revenue growth of any first quarter since 1999," CFO Chris Liddell said in a statement. "Operating income growth of over 30 percent also reflects our ability to translate revenue into profits while making strategic investments for the future."
For the current quarter, Microsoft said that its revenue is expected to be in the range of $15.6 billion to $16.1 billion, with per-share earnings of 44 cents to 46 cents. For the full fiscal year, Microsoft said to expect revenue in the range of $58.8 billion to $59.7 billion, with per-share earnings of around $1.78 to $1.81.
Update: In an interview, Microsoft investor relations general manager Colleen Healy noted that the company has lifted its revenue guidance for the year by more than $2 billion as the company has seen positive reactions to the products introduced in the past nine months.
"It's fantastic to see these products are off to a good start... because they will have a multi-year impact," Healy said.
Microsoft saw particularly strong results in the Windows client business, where revenue grew 25 percent in the quarter. That was aided by overall strong PC sales as well as gains the company made in reducing piracy rates. Healy said that reduction in piracy rates accounted for about 5 percentage points of the the growth.
Buoyed by the launch of Halo 3, Microsoft saw a 90 percent increase in revenue for its Entertainment and Devices unit, which also swung to profitability in the quarter. Healy said that Microsoft sold 1.8 million Xbox 360 consoles in the quarter, but declined to give a forecast for the holiday quarter, citing competitive concerns. The company is still aiming to have the unit profitable for the full fiscal year, Healy said.
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.
Subject Line Quote Source:
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=MSFT:US&sid=a_fhszxPibnw
Now - keep an eye on that last part. Now we'll compare it to:
[i]"For the current quarter, Microsoft said that its revenue is expected to be in the range of $15.6 billion to $16.1 billion, with per-share earnings of 44 cents to 46 cents"[/i]
Well now... guess who is out-performing MSFT in earnings by a ratio of 2.19:1 ? So where is the justification for calling MSFT's qurterly earnings a "blowout"? Cripes, it's more like a barely discernible whimper compared to its competition (Nintendo, Apple, you-name-it).
Damn - during a time of tech plenty, these are sucky growth figures.
/P
Meanwhile, it appears that Apple is blasting the doors of of Microsoft in growth overall as well. Notice how the MSFT blurbs were extremely careful to avoid mentioning units shipped when it came to Windows? Prolly because the only unit figures they could be even halfway not-ashamed to let out got its boost from Halo3.
/P
Price/Earning (which you can also call Hype Factor) is 51 for AAPL and 22 for MSFT, on last 12 month results.
Consider:
-- In Q3, AAPL grossed $6.22 billion, mostly from selling computers while MSFT grossed $12.57 billion mostly from selling software. Of course you'd expect APPL's gross revenue to be bigger on a "per consumer" basis because most consumers buying OS X are buying it by purchasing a $1,500+ Mac. Dell and HP see most of that revenue when someone buys a Vista PC.
-- AAPL's OS share in the client computing market (desktops, laptops, etc.) is rising, but still under 5% whereas MSFT is still close to 90%. Do you really expect substantial growth from a company who already has a holds a huge majority of their core market? Predictably, MSFT grows as the overall computing market grows.
-- As others have pointed out, MSFT's P/E is much higher than APPL's. This is not a measure of success, of course, but it helps investors understand which is a better value.
Steady execution, performance and profitability are what's expected of MSFT at this point in their existance whereas APPL is clearly on the comeback/growth trail. Objectively, MSFT had a great quarter for their shareholders even if you hate them and everything they make.
-Mister Winky
however, since microsoft has 9.36 billion shares compared to Apple's 872 million shares this type of comparison is not relevant.
let's look at all the numbers.
MSFT:
Revenue = $15.6 billion to $16.1 billion
Profit = $4.29 billion
EPS = $0.44 to $0.46
AAPL:
Revenue = $6.22 billion
Profit = $904 million
EPS = $1.01
Comparison:
Revenue: 15.6(the low end of MSFT)/6.22 billion
MSFT revenue 2.5 times greater than AAPL!
Profit: 4.29 billion/904 million
MSFT profit nearly 4.75 times greater than AAPL!
EPS: $1.01/$0.46
AAPL EPS 2.19 times greater as you pointed out
Profit is the number that really matters. Notice that MSFT's revenue is 2.5x that of AAPL. also note that despite having revenue of only 2.5x AAPL, MSFT's profit is 4.75x greater, meaning that MSFT converts a higher percentage of their revenue into profit in comparison to AAPL.
what is that percentage? easy.
MSFT net 4.29 billion out of 16.1 billion, or about 26.6%.
AAPL net 904 million out of 6.22 billion, or about 14.5%.
this my friend is where the justification comes to call MSFT's quarterly earnings a "blowout" ... you may not like MSFT, but the numbers don't lie.
Also how many of those people who bought a machine is Vista on it upgraded to XP or jumped off the MS Titanic into Linux?
All things considered this is not a good performance.
Oh, and the XBOX project is still a few billion in the hole.
You're kidding, right? That's like saying the only think driving tire sales is new cars. A sale is a sale.
90%+ of consumers who buy a computer don't change the OS that comes loaded on the machine unless they update years later. Die hard technologists build their own or buy models that come with no OS or a different OS pre-loaded.
Vista haters only see what they want to see, but you can't deny that the OS is selling and MS is meeting their expectations and those of their shareholders.
-Mister Winky
If I buy a new Mac, then it's okay to use that as a legitimate metric to say OS/X is selling well.
But wait - the ONLY OS sold on Macs is....drumroll....OS/X!
Your theory just tanked Apple because you *can* buy a PC with Linux installed if you want. There *is* a choice with PCs, but not with Macs. Therefore, according to your logic, Mac sales aren't a legitimate metric for Apple to use for OS/X sales.
Well done. :)
"Oh, and the XBOX project is still a few billion in the hole"
Dude -- Apple sold 2.16 million macs this quarter, while MS sold 1.8 million xboxes (forget computers). Thats virtually one xbox sold for every mac. The 6.5 bn. loss of the enertainment division represents a pretty amazing investment if they can pull off numbers like that.
Anyway, why am I wasting my time explaining stuff to somebody called MSSlayer? Judging by your name, your objectivity has already been compromised.
Yes we get from you name that you hate MS....but please read the facts. MS is still dominating and making a lot of money doing so.
- Let the open sourcers eat that breakfast!
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by WJeansonne
October 25, 2007 6:23 PM PDT
- See what happens when you produce a quality product, and one that isn't overpriced like the Mac, nor junky and "free" like most open source software? It's called value folks.
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- Wait a sec there
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by rapier1
October 25, 2007 7:52 PM PDT
- I'm not an MS basher by any means but I belive that there are very valid and very useful open source solutions. Considering the number of businesses making use of open source software for production purposes I'd have to say they'd agree with me (OpenSSH, OpenSSL, Apache, PHP, DB4, PostGres, MySQL, zebra, etc etc etc). This isn't a football game after all - its not about some OS 'winning'. Its about IT people and consumers realizing that there are multiple ways to address most every problem and finding the solution - of many solutions available - that suits them best.
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- Not a metric you can compare
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by Seaspray0
October 28, 2007 8:58 AM PDT
- Open source under the GPL is free, therefore it isn't "sold" and you cannot charge for it. You can't compare profits against a proprietary software in a case like that. While open source may not be your cup of tea, please be objective in your view of it. It does meet the needs of many people. I too use windows for business reasons but I understand that others may not have the same needs and wants as I do and will use something different. Good! That's as it should be. I wouldn't expect them to buy the same automobile as I have for the same reason.
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(31 Comments)Billions in sales! That's what.