Microsoft suffers worst fiscal year ever while Apple rises

Posted:
in General Discussion edited January 2014
Once accustomed to ever-rising profits, Microsoft has been dealt two blows with both its second quarter of losses in a row and its first-ever annual decline, all at the same time as Apple has had its best non-holiday quarter yet.



The Redmond, Washington company told investors on Thursday that its spring quarter sales shrank 17 percent compared to a year ago, down to $13.1 billion, and pinned most of the shortfall on a perilous drop in sales for its Client division, which produces the Windows operating system and forms the backbone of its business. Revenue for that group fell an unprecedented 28.7 percent to just over $3.1 billion and was hit directly by slower sales of regular and server PCs; Microsoft estimates these have fallen 5 to 7 percent compared to where they were a year ago.



Other divisions also took a hit, including a 25 percent blow to the Entertainment and Devices group that handles both the Xbox and Zune as well as in Microsoft's server software, online and business segments.



Unsurprisingly, Microsoft chief operating officer Kevin Turner associated the decline with "challenges" in the current economic climate. However, the result caps off a particularly disastrous year for the company. Just last quarter, the software's developer revenue had declined 6 percent after years of steady gains and management felt forced to cut 5,000 jobs. Either of these were previously extremely rare occurrences, but the second negative quarter was enough to tip Microsoft into the red for its complete fiscal year ended in June -- a fate unheard of in the 23 years since the company first went public and began reporting its results.



Although eager to show that its performance might turn around soon, pointing out $750 million in cost-cutting and the fall releases of Windows 7 and Windows Server 2008 R2, Microsoft's results stand in stark contrast to Apple's. The Mac maker on Tuesday reported its best non-holiday quarter in history after posting record revenue and said its profits alone had grown 15 percent as two of the three pillars of its business performed above expectations. Moreover, Microsoft's willingness to provide an overview of the PC industry has inadvertently confirmed Apple bucking a wider downward trend. Mac sales increased 4 percent this quarter versus spring 2008 and may have Apple gaining almost as much percentage-wise as the predominantly Windows-led market will have lost.



Having to recognize a second straight quarter of declining fortunes additionally underscores an increasing sense of urgency at Microsoft, whose reputation has been hurt by real and imagined flaws in Windows Vista. In the past several months, it has resorted to price-oriented ads that attack supposedly inflated Mac prices but de-emphasizing Windows itself. The ads themselves were at least somewhat neutered by a round of price cuts and system upgrades to MacBook Pros that rendered many of the arguments invalid or muted.



And while COO Turner has tried to claim that the ads were effective by noting Apple's request they be pulled, substantially reduced Windows sales and the ensuing fall in Microsoft's bottom line have together revealed the TV spots doing little, if anything, to prevent customers from buying Macs in greater numbers.
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Comments

  • Reply 1 of 110
    mactrippermactripper Posts: 1,328member
    Quote:

    Microsoft suffers worst fiscal year ever while Apple rises





    Good, maybe the stock will get so cheap Apple and/or Google can buy them out and end the suffering of billions.



    If Apple put their mind to it, they could wipe Microsoft off the face of the earth.



    Guess Steve just can't do it to old Bill.





    Maybe Eric can.
  • Reply 2 of 110
    echosonicechosonic Posts: 446member
    AAAAAHahahahahahahahahahahahahahahahahahahahayha.. ..WOOOOOOOOhoohoohoohoohoohoohoohoohohooohahahahah ahahahahahahahahahahahahahaha
  • Reply 3 of 110
    quadra 610quadra 610 Posts: 6,738member
    Should read "Microsoft's worst year yet." There's more to come if MS continues on this course.



    Those Laptop Hunter ads were complete FAILURES. Anyone with a modicum of taste would have immediately recognized that MS was heading right for the low end. Did they even know it?? Do they have any idea where their decisions will ultimately lead? Part of the problem is their targeting of Apple. Bad move. The most unpredictable adversary, dedicated to a very clear, very focused mission statement. And it has nothing to do with the bottom end.



    Who didn't see this coming?



    And really, this is what has Microsoft acting so defensive: Windows still has overwhelming unit sale market share, but it is now almost entirely at the low end of the market. Bargain bin status. Not a good image at all.



    This drop comes as no surprise. Sure, blame it on the recession . . . when Apple is thriving in hard times, on Mac sales specifically. MS of course, will never admit that the problem isn't the recession: it's the culture at MS. It's the attitude when it comes to what happens from the time a user picks up a device to the time the action is executed: user experience. But . . . They. Don't. Give. A. Damn. Never have.



    And all of this under Ballmer's watch.
  • Reply 4 of 110
    dreyfus2dreyfus2 Posts: 1,063member
    Quote:
    Originally Posted by AppleInsider View Post


    And while COO Turner has tried to claim that the ads were effective by noting Apple's request they be pulled, substantially reduced Windows sales and the ensuing fall in Microsoft's bottom line have together revealed the TV spots doing little, if anything, to prevent customers from buying Macs in greater numbers.



    Let's see. Before MS started this completely unscripted nonsense, Apple sold around 60% of computers costing more than 1k, after the adds they cover 91%... So, I assume you wrote they were doing "little, if anything" out of compassion? Truth is, they made it worse for PC manufacturers and MS. They are compelled to be cheap now. Great job and thanks for all the fish :-)
  • Reply 5 of 110
    nasseraenasserae Posts: 3,152member
    Good. Hopefully this will put pressure on MS to go back to their original business plan and focus on improving their software instead of sticking their noses in others markets.
  • Reply 6 of 110
    Quote:
    Originally Posted by Quadra 610 View Post


    Should read "Microsoft's worst year yet." There's more to come if MS continues on this course.



    Those Laptop Hunter ads were complete FAILURES. Anyone with a modicum of taste would have immediately recognized that MS was heading right for the low end. Did they even know it?? Do they have any idea where their decisions will ultimately lead? Part of the problem is their targeting of Apple. Bad move. The most unpredictable adversary, dedicated to a very clear, very focused mission statement. And it has nothing to do with the bottom end.



    Who didn't see this coming?



    And really, this is what has Microsoft acting so defensive: Windows still has overwhelming unit sale market share, but it is now almost entirely at the low end of the market. Bargain bin status. Not a good image at all.



    This drop comes as no surprise. Sure, blame it on the recession . . . when Apple is thriving in hard times, on Mac sales specifically. MS of course, will never admit that the problem isn't the recession: it's the culture at MS. It's the attitude when it comes to what happens from the time a user picks up a device to the time the action is executed: user experience. But . . . They. Don't. Give. A. Damn. Never have.



    And all of this under Ballmer's watch.



    Well said!
  • Reply 7 of 110
    Quote:
    Originally Posted by AppleInsider View Post


    ...Microsoft into the red for its complete fiscal year ended in June...



    Adding up Microsoft's Net Income for the previous 3 quarters, plus this just announced quarter totals to around $14 billion.



    Declining, but positive, profits are completely different then a net loss (or being "in the red")



    Or am I missing something...
  • Reply 8 of 110
    malaxmalax Posts: 1,598member
    I'm afraid that MSFT didn't have it's worst fiscal year ever nor did it "end the year in the red." Those statements would imply their least profitable year and, in fact, a loss for the year. The correct statement would be like this from the WSJ:



    "The quarter capped the software giant's first full year of declining sales since it went public more than two decades ago."



    "In the red" implies losses, not shrinking profits. There is a big difference. MSFT still made more in profits than Apple this quarter, and this year, even if they didn't do as well as they did last year.



    So yeah it's rotten news for MSFT, but most companies would LOVE to be in the position that they're in.
  • Reply 9 of 110
    quinneyquinney Posts: 2,508member
    Quote:
    Originally Posted by AppleInsider View Post


    And while COO Turner has tried to claim that the ads were effective by noting Apple's request they be pulled, substantially reduced Windows sales and the ensuing fall in Microsoft's bottom line have together revealed the TV spots doing little, if anything, to prevent customers from buying Macs in greater numbers.



    Apparently "Cartwheel" Turner's gymnastic display was premature.
  • Reply 10 of 110
    expatexpat Posts: 110member
    I think we also have to look at what's on the horizon. We all know from an Apple fan standpoint, no one buys when you know a new product is due. Windows 7 might move more computers after it is out. Sure, Apple has a new OS coming out the same time, but I think they finally priced it right at the $29 mark. I personally wouldn't have a problem buying a new Mac and then shelling out $29 in a few months for an OS update - but shelling out over $200? That's stupid.



    Who knows what will happen in the future - all I head about is Zune HD IN THE FALL, Win 7 IN THE FALL, Natal IN 2010, MS retail stores in 2010. Really, its all in the future. Sure, this might be good, but what happens if things fail? Bad reviews of the Zune HD and the whole line might flop. That, or if Windows 7 has a bad first month where there are tons of compatibility issues, viruses and bugs it could sink the OS with Vista-like results.



    In other words, right now, both companies are in slow periods - Apple's getting set for a new OS, new iPods and maybe a tablet. Microsoft is getting ready for a new Zune and a new OS. The thing is Apple is thriving, and MS isn't. We'll see. This fall is either going to see an MS rebound, or a sharp turn downwards, but regardless, they have placed all their bets in what's coming up in 3 months, so fall will likely shape the company for a few years.
  • Reply 11 of 110
    dreyfus2dreyfus2 Posts: 1,063member
    Quote:
    Originally Posted by Wil Maneker View Post


    Declining, but positive, profits are completely different then a net loss (or being "in the red")

    Or am I missing something...



    Well, a "net loss" is certainly different, but a negative value (or one in braces) in the year-over-year comparison column is also "in the red".
  • Reply 12 of 110
    Quote:
    Originally Posted by malax View Post


    I'm afraid that MSFT didn't have it's worst fiscal year ever nor did it "end the year in the red." Those statements would imply their least profitable year and, in fact, a loss for the year. The correct statement would be like this from the WSJ:



    "The quarter capped the software giant's first full year of declining sales since it went public more than two decades ago."



    "In the red" implies losses, not shrinking profits. There is a big difference. MSFT still made more in profits than Apple this quarter, and this year, even if they didn't do as well as they did last year.



    The article needs to be rewritten.
  • Reply 13 of 110
    clexmanclexman Posts: 144member
    Microsoft still made tons of money and profits. It is not even close to their worst year ever. They just made less this year than last year for the first time.



    How many times has Apple done that? Lots.



    Apple is still not even close to making more money than MS.
  • Reply 14 of 110
    charlitunacharlituna Posts: 7,178member
    Quote:
    Originally Posted by AppleInsider View Post




    And while COO Turner has tried to claim that the ads were effective by noting Apple's request they be pulled,



    due to inaccurate information, not because Apple is scared of lost sales (as some articles tried to imply)



    Quote:
    Originally Posted by MacTripper View Post


    .



    If Apple put their mind to it, they could wipe Microsoft off the face of the earth.



    Guess Steve just can't do it to old Bill.



    no Steve won't do it. but not cause of Bill. He won't do it because to destroy Microsoft puts Apple at risk of gaining the market strength and when that happens, Apple loses the sanction to tie hardware and software. it would be abusive at that point and violate anti-trust. Apple would be forced to reopen the whole cloning game and unlock OSX to work on all configurations. Something Apple does NOT want.



    Quote:
    Originally Posted by NasserAE View Post


    Good. Hopefully this will put pressure on MS to go back to their original business plan and focus on improving their software instead of sticking their noses in others markets.



    Quote:
    Originally Posted by Expat View Post


    I think we also have to look at what's on the horizon. We all know from an Apple fan standpoint, no one buys when you know a new product is due. Windows 7 might move more computers after it is out.



    agreed on both points. Microsoft needs to get an improved and stellar product out on the market. and yes they have positioned Windows 7 to be that product. so we shall see what happens when that software debuts
  • Reply 15 of 110
    wobegonwobegon Posts: 764member
    Anyone else smell that? Something burning? *scrunches nose*



    I was actually surprised by the size of the drop in revenue of their Xbox/Zune devision. 25%? Yowza.
  • Reply 16 of 110
    aaarrrggghaaarrrgggh Posts: 1,558member
    What a horrible article!



    MSFT made $3B profits or $0.33 per share. Which is more than AAPL made. Less than Analysts had hoped by $0.02 per share.



    I'll stick by my $22 price target to by MSFT shares, although I am holding steady on my AAPL shares and options...
  • Reply 17 of 110
    fraklincfraklinc Posts: 244member
    Quote:
    Originally Posted by clexman View Post


    Microsoft still made tons of money and profits. It is not even close to their worst year ever. They just made less this year than last year for the first time.



    How many times has Apple done that? Lots.



    Apple is still not even close to making more money than MS.



    It really don't matter how much money M$ makes if they're flushing it down the toilet.

    Apple is sitting on piles and piles of cash while M$ keep burning cash. To me Microsoft is not even near as healthy as Apple is.
  • Reply 18 of 110
    macinthe408macinthe408 Posts: 1,050member
    MS's R&D budget is bigger than all of Apple combined. (What comes out of that R&D shop, other than the Word grammar checker, is fodder for another thread.)
  • Reply 19 of 110
    al_bundyal_bundy Posts: 1,525member
    I've been using windows 7 since the beta and it's ok. Nothing more than an incremental upgrade. Nothing like when windows 95, windows 2000 or windows xp came out. Windows vista and 7 have some nice features to save money but nothing revolutionary



    Microsoft's problem is that apple is cleaning up in the mobile space and microsoft is clinging to their oem partner model who don't care what os they use I'm their products or quality.



    On the server side a lot of products are too new and companies will probably upgrade next version
  • Reply 20 of 110
    thanx_althanx_al Posts: 44member
    Winders 7 better be a huge hit. I remember before Vista was launched, all the MS fan boyz claimed it would be the second coming of the computer. If people aren't doing cartwheels in the streets it will make MS irrelevant. If it is even close to what happened with Vista, they're toast.



    P.S. Title of the post should have been "nanni-nanni-boo-boo-stick your head in poo-poo". Not that I'm complaining. Been burned so many time by Microshit I truly hope they go under. But they are still turning a profit. We'll see how long that lasts as cheap vs. saturated becomes a real issue for profit margins. Myself, for the first time since 3.1, I won't be loading the new MSOS. Don't really care anymore.
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