Apple poised to beat Microsoft's quarterly profits for first time in 20 years
Microsoft is expected to report lower profits than last year as PC market growth stalls, making it almost certain that Apple's latest $6 billion earnings record will exceed Microsoft's for the first time since 1990.
Microsoft is expected to report $5.93 billion over the winter quarter, according to a report by Reuters, although it's possible the company could post a blowout quarter that exceeds the street's expectations.
Just two years ago, Microsoft was posting twice the quarterly profits of Apple. Over the last few years however, Apple has established new markets in smartphones and with the iPad, two product segments Microsoft has failed to execute in.
The report cited Tim Bajarin, president of tech research firm Creative Strategies, as saying, "Microsoft is still a juggernaut in the PC business; Windows-based machines are still selling over 300 million a year. But they missed the smartphone revolution, and even though they were the first to really push the tablet, Apple basically redesigned it and left Microsoft in the dust."
Windows Phone fails to connect
Last year, Microsoft scrambled to scuttle Windows Mobile 6 and the mobile software marketplace for that platform that it had just finished, in order to launch an entirely new, incompatible mobile platform based on more modern technology, with an easy to use touch interface rather than a windowing interface requiring a keypad or stylus to navigate.
An interim product, launched with Verizon under the brand KIN, failed miserably. However, even sales of Windows Phone 7 have been disappointing, with even LG, one of Microsoft's leading WP7 licensees, referring to sales as "less than we expected."
LG's marketing strategy and planning team director James Choi observed that "for tech guys like us it might be a little bit boring after a week or two, but there are certain segments that it really appeals to. We strongly feel that it has a strong potential even though the first push wasn?t what everyone expected."
Even Microsoft's developers took a dim view of the platform, with Justin James observing, "unless you consider Windows Phone 7 to be a 'must do' platform for development (which is quite unlikely), I suggest that you think of Windows Phone 7 development as a hobby or a learning experience rather than a source of revenue until the App Hub issues are sorted out."
In December Microsoft tried to frame sales of Windows Phone 7 as flatteringly as possible, referring to "phone manufacturer sales," defined as "phones being bought and stocked by mobile operators and retailers on their way to customers," as having reached a milestone of 1.5 million units, and saying this was "inline with our expectations."
That number was actually barely enough to fill Microsoft's well developed global channel. One reseller reported that the new WP7 models "are by and large generic phones from well known manufacturers, and in most cases an almost identical model is available from the same manufacturer with Android, and given the choice people seem to be picking Android."
Windows tablets flop
Hot on the heels of failed launch of last year's Slate PC initiative with HP, Microsoft killed the vaporware Courier project that many hoped would take on the iPad.
This year, the company promised to start over again, two years from now, with a version of Windows capable of running on the efficient chips of the ARM Architecture, just like last year's iPad and other Android tablet products hitting the market.
"I wish they did this [switch to ARM] two years ago, it's something they should have thought of," said Sid Parakh, analyst at McAdams Wright Ragen. "But it is a long game. The question becomes: Is the iPad a cannibalization of Microsoft's existing products, or an added component of consumer electronics spending? I'm sure it's a mix of both."
PC growth slower than predicted
Microsoft's bread and butter, the PC market, was up globally only 3.1 percent in the winter quarter, and US sales actually contracted by 6.6 percent according to figures reported by Gartner. Over all of 2010, PC shipments were up just 13.8 percent world wide, much lower than Gartner's original forecast for 2010 calling for 19.2 percent growth.
In addition to slow PC sales, Apple's iPad has increasing eaten into both consumer and enterprise PC demand, with Apple selling more than 7.3 million in the winter quarter and over 14 million in 2010. This year, Apple is expected to sell as many as 40 million of the devices, largely at the expense of Windows PCs.
Apple's iPad sales are already distorting the component markets for RAM and hard drives, and clearly slowing sales of conventional PCs, even as IDC and Gartner scramble to hide iPads behind the newly invented "media tablet" market to avoid direct comparisons to other tablet products and to PCs.
If iPads were counted as PCs, Apple would be the number one PC maker in the US with 24 percent of the market. Microsoft hasn't really faced a PC market that wasn't completely monopolized by Windows since the days before Windows, when it was earning less than Apple, a position it now appears to be in again.
Microsoft is expected to report $5.93 billion over the winter quarter, according to a report by Reuters, although it's possible the company could post a blowout quarter that exceeds the street's expectations.
Just two years ago, Microsoft was posting twice the quarterly profits of Apple. Over the last few years however, Apple has established new markets in smartphones and with the iPad, two product segments Microsoft has failed to execute in.
The report cited Tim Bajarin, president of tech research firm Creative Strategies, as saying, "Microsoft is still a juggernaut in the PC business; Windows-based machines are still selling over 300 million a year. But they missed the smartphone revolution, and even though they were the first to really push the tablet, Apple basically redesigned it and left Microsoft in the dust."
Windows Phone fails to connect
Last year, Microsoft scrambled to scuttle Windows Mobile 6 and the mobile software marketplace for that platform that it had just finished, in order to launch an entirely new, incompatible mobile platform based on more modern technology, with an easy to use touch interface rather than a windowing interface requiring a keypad or stylus to navigate.
An interim product, launched with Verizon under the brand KIN, failed miserably. However, even sales of Windows Phone 7 have been disappointing, with even LG, one of Microsoft's leading WP7 licensees, referring to sales as "less than we expected."
LG's marketing strategy and planning team director James Choi observed that "for tech guys like us it might be a little bit boring after a week or two, but there are certain segments that it really appeals to. We strongly feel that it has a strong potential even though the first push wasn?t what everyone expected."
Even Microsoft's developers took a dim view of the platform, with Justin James observing, "unless you consider Windows Phone 7 to be a 'must do' platform for development (which is quite unlikely), I suggest that you think of Windows Phone 7 development as a hobby or a learning experience rather than a source of revenue until the App Hub issues are sorted out."
In December Microsoft tried to frame sales of Windows Phone 7 as flatteringly as possible, referring to "phone manufacturer sales," defined as "phones being bought and stocked by mobile operators and retailers on their way to customers," as having reached a milestone of 1.5 million units, and saying this was "inline with our expectations."
That number was actually barely enough to fill Microsoft's well developed global channel. One reseller reported that the new WP7 models "are by and large generic phones from well known manufacturers, and in most cases an almost identical model is available from the same manufacturer with Android, and given the choice people seem to be picking Android."
Windows tablets flop
Hot on the heels of failed launch of last year's Slate PC initiative with HP, Microsoft killed the vaporware Courier project that many hoped would take on the iPad.
This year, the company promised to start over again, two years from now, with a version of Windows capable of running on the efficient chips of the ARM Architecture, just like last year's iPad and other Android tablet products hitting the market.
"I wish they did this [switch to ARM] two years ago, it's something they should have thought of," said Sid Parakh, analyst at McAdams Wright Ragen. "But it is a long game. The question becomes: Is the iPad a cannibalization of Microsoft's existing products, or an added component of consumer electronics spending? I'm sure it's a mix of both."
PC growth slower than predicted
Microsoft's bread and butter, the PC market, was up globally only 3.1 percent in the winter quarter, and US sales actually contracted by 6.6 percent according to figures reported by Gartner. Over all of 2010, PC shipments were up just 13.8 percent world wide, much lower than Gartner's original forecast for 2010 calling for 19.2 percent growth.
In addition to slow PC sales, Apple's iPad has increasing eaten into both consumer and enterprise PC demand, with Apple selling more than 7.3 million in the winter quarter and over 14 million in 2010. This year, Apple is expected to sell as many as 40 million of the devices, largely at the expense of Windows PCs.
Apple's iPad sales are already distorting the component markets for RAM and hard drives, and clearly slowing sales of conventional PCs, even as IDC and Gartner scramble to hide iPads behind the newly invented "media tablet" market to avoid direct comparisons to other tablet products and to PCs.
If iPads were counted as PCs, Apple would be the number one PC maker in the US with 24 percent of the market. Microsoft hasn't really faced a PC market that wasn't completely monopolized by Windows since the days before Windows, when it was earning less than Apple, a position it now appears to be in again.
Comments
How much revenue is the Kinect expected to attract? They sold a lot of those things over the Holidays.
Apple taking over Microsoft's spot... cool. Kids can sleep safely in their beds.
Kids have been sleeping safely since May 26, 2010: http://www.nytimes.com/2010/05/27/te...y/27apple.html
When did Apple beat MS? revenue in a quarter or are they besting both MS? revenue and profit within the same quarter?
How much revenue is the Kinect expected to attract? They sold a lot of those things over the Holidays.
http://techcrunch.com/2010/10/28/app...osoft-revenue/
Last quarter. It has been a truly amazing ride to watch Apple over the last 12 years.
Kids have been sleeping safely since May 26, 2010: http://www.nytimes.com/2010/05/27/te...y/27apple.html
Indeed.
It is hard to predict what is next for Apple. Everyone hopes the AppleTV grows legs but I'm not seeing it so far. Netflix is that thing that is probably driving its sales but an App store for the AppleTV is what will explode its unit volume hence getting the rest of the studios onboard.
Beyond the AppleTV is what? Media players, smartphones, tablets, and TV media centers. Maybe an in-car entertainment system. That would mean iOS embedded in appliances.
We created a monster. Apple may stumble at some point. Giants usually do.
It is hard to predict what is next for Apple. Everyone hopes the AppleTV grows legs but I'm not seeing it so far. Netflix is that thing that is probably driving its sales but an App store for the AppleTV is what will explode its unit volume hence getting the rest of the studios onboard.
Beyond the AppleTV is what? Media players, smartphones, tablets, and TV media centers. Maybe an in-car entertainment system. That would mean iOS embedded in appliances.
Even if Apple doesn't make inroads into one more market with a new product line, they could coast for the next 10 years just with what they have put together so far. Macs continue to outperform. Smartphones are exploding. The iPad owns a brand new device category. Hard to see them stumbling any time soon.
By MIGUEL HELFT and ASHLEE VANCE
Published: May 26, 2010 in the New York Times
Microsoft?s chief executive, Steven A. Ballmer, shrugged off the shift Thursday morning. "No technology company on the planet is more profitable than we are," he said in New Delhi, where he had come to tout Microsoft?s cloud computing plans.
http://techcrunch.com/2010/10/28/app...osoft-revenue/
Last quarter. It has been a truly amazing ride to watch Apple over the last 12 years.
Thanks. Now that you?ve posted it I remember. (I woke up today with the flu. It appears to be frying parts of my memory. Cameronj was right last night, I am on edge, I just didn?t know it yet. :
It?s pretty amazing they have gone from besting their market cap, their revenue and, most likely, their profits all within the 2010 calendar year. A couple years ago I thought it would take many quarters after they topped MS revenue to beat their profit simply because of the differences in HW and SW.
Another great article by DED. I only recently figured out that all my favorite articles were written by the same guy. I'm your newest fan.
Sheesh!
Well that day just might be upon us, 20 years sooner than I expected. But that also means Apple could lose its primacy just as quickly as it grabbed it if they slip up enough and let someone else flit past them. It's got to be someone or some company that can out-Apple Apple though and I don't see anything out there that has the hardware, software, product dev and marketing smarts that Apple has.
Oh and by the way, Jobs said the problem with AppleTV and similar devices is the go-to-market strategy for which the cable companies are the big dumb oaf sitting right smack in the middle of the road to progress. We'll know that Jobs has stopped treating AppleTV (and our living rooms) as a hobby when he takes Apple's cash mountain and uses it to kick that big dumb oaf of the street by buying up Comcast. And we will all be cheering because, seriously, is there anyone here who doesn't hate his cable provider?
It could be a painful moment for Microsoft, which effectively saved Apple from extinction with a $150 million investment in 1997.
Ah, no. Fact checking, anyone?
The original article makes this boneheaded statement:
Ah, no. Fact checking, anyone?
MS payed 150 mil for all the copycat work it did.
MS payed 150 mil for all the copycat work it did.
More or less. The irritating part of seeing this old falsehood repeated so far removed from the events and the facts is that it's seemingly meant to perpetuate the myth that, deep down, Apple's success really belongs to Microsoft.
We created a monster.
Which "we" are you referring to?
Apple may stumble at some point.
We may get hit by an asteroid at some point
It is hard to predict what is next for Apple. Everyone hopes the AppleTV grows legs but I'm not seeing it so far. Netflix is that thing that is probably driving its sales but an App store for the AppleTV is what will explode its unit volume hence getting the rest of the studios onboard.
Apple has quite a bit of content via Disney - and they are finally starting to engage the the independents via iTunes Connect. The point is we didn't know what the details were before the iPhone or iPad, and they did just fine. Apple no doubt has a long term strategy for the Apple TV. The difference between Apple and other companies is Apple marches to their own drum, and they only make major moves when they feel it's appropriate.
Beyond the AppleTV is what? Media players, smartphones, tablets, and TV media centers. Maybe an in-car entertainment system. That would mean iOS embedded in appliances.
I think people are vastly underestimating the iPad as a replacement for the traditional PC. What I see as next is an array of iOS devices that do not require a connection to iTunes and thus a traditional desktop PC. Apple has just started tapping a huge market out there for real personal computing.