Microsoft record earnings beat Street, but Windows revenue declines 2%

Posted:
in General Discussion edited January 2014
After Microsoft on Thursday announced record revenue of $17.37 billion, analysts quickly voiced concerns over the news that revenue from the company's Windows division declined 2 percent in fiscal 2011.



The Redmond, Wash., Windows maker drew a muted response to the revelation of 8 percent year over year growth and net profit of $5.87 billion during its fourth quarter of fiscal 2011. For the full fiscal year, which ended on June 30, the company reported $69.94 billion in revenue, up 12 percent from 2010.



"Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion,? said Peter Klein, chief financial officer for the company. ?Our platform and cloud investments position us for long-term growth.?



Analysts, however, were skeptical over the long-term likelihood of Microsoft's growth, honing in on the fact that its Windows business declined 1 percent in the fourth quarter and 2 percent for the fiscal year. However, the company asserted that, excluding the impact of last year's Windows 7 launch and revenue deferral, Windows growth was in line with the overall PC market growth of 2 percent to 4 percent.



Despite a 16.25 percent increase in sales, Microsoft's online services unit, which has bled almost $6.5 billion dollars over the past three years, posted a loss of $728 million, compared to a loss of $688 million a year ago.



"All eyes are on Windows and how they are ultimately going to extend this franchise in the future, as the PC business continues to lose share to the tablets," Reuters reported Edward Jones analyst Josh Olson as saying. "Microsoft is really a show-me story in terms of its ability to extend its core flagship products to these new growth platforms."



"These numbers are good. The question is, what will make Microsoft break this range in which it is stuck, between $25 and $28?" said Trip Chowdhry, managing director at Global Equities Research. "I don't see these numbers giving an indication that the stock is going to break away."



Shares of Microsoft remained flat in after-hours trading. Since the beginning of the year, the stock is down 2.71 percent.



Even as Apple's iPad has eaten into PC sales, Microsoft is betting that the next version of Windows will reverse the trend. Instead of opting to design an operating system specifically for tablets, the company has said it "views a tablet as a PC" and plans to bring Windows "everywhere on every device without compromise."



The company's results comes as a stark contrast to Apple's blowout performance in the June quarter. The Cupertino, Calif., company posted $28.57 billion in revenue and a 125 percent leap in profits to $7.31 billion, nearly 25 percent more than its rival's profits. It was just last quarter that Apple beat Microsoft's profits for the first time in decades.
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Comments

  • Reply 1 of 56
    solipsismsolipsism Posts: 25,726member
    I'd bet that 2% Windows revenue decline still meant an increase in Windows net profit seeing how much of the R&D is already accounted for. Still, I think it's not something we've seen before with MS and may be the start of a long and unfruitful trend.
  • Reply 2 of 56
    sumjuansumjuan Posts: 27member
    Seems like they have run out of deferred licenses to forward post.

    Cant wait to see how creative their bean counters will be for the next quarter.
  • Reply 3 of 56
    If I was the CEO of Microsoft, I'd realize that success with the iPad did not come from trying to cram OS X onto it. They used iOS, and that's why Microsoft needs to put their Windows Mobile 7 OS on tablets. I think the Metro GUI is a great for post PC devices. Having said that, I drank too much Apple Kool-aid and I'm staying with iOS devices. Android, Palm, Blackberry, and Microsoft anything can kiss my ass.
  • Reply 4 of 56
    mdriftmeyermdriftmeyer Posts: 7,142member
    Quote:
    Originally Posted by solipsism View Post


    I'd bet that 2% Windows revenue decline still meant an increase in Windows net profit seeing how much of the R&D is already accounted for. Still, I think it's not something we've seen before with MS and may be the start of a long and unfruitful trend.



    I imagine the > $1 Billion in Patent licensing taxes are giving Microsoft a sigh of relief. Without them even more analysts would downgrade them.
  • Reply 5 of 56
    mdriftmeyermdriftmeyer Posts: 7,142member
    Quote:
    Originally Posted by ArchAngel21x View Post


    If I was the CEO of Microsoft, I'd realize that success with the iPad did not come from trying to cram OS X onto it. They used iOS, and that's why Microsoft needs to put their Windows Mobile 7 OS on tablets. I think the Metro GUI is a great for post PC devices. Having said that, I drank too much Apple Kool-aid and I'm staying with iOS devices. Android, Palm, Blackberry, and Microsoft anything can kiss my ass.



    And more importantly, it's 5 years of R&D upon which Microsoft will have to catch up.
  • Reply 6 of 56
    bertpbertp Posts: 274member
    Quote:
    Originally Posted by mdriftmeyer View Post


    And more importantly, it's 5 years of R&D upon which Microsoft will have to catch up.



    Right on.
  • Reply 7 of 56
    asherianasherian Posts: 144member
    Quote:
    Originally Posted by ArchAngel21x View Post


    If I was the CEO of Microsoft, I'd realize that success with the iPad did not come from trying to cram OS X onto it. They used iOS, and that's why Microsoft needs to put their Windows Mobile 7 OS on tablets. I think the Metro GUI is a great for post PC devices. Having said that, I drank too much Apple Kool-aid and I'm staying with iOS devices. Android, Palm, Blackberry, and Microsoft anything can kiss my ass.



    Windows 8 has the metro UI for touch.



    People need to realize Win8 isn't just Win7 on touch devices. There's two distinct user modes: Metro (Windows Phone 7-esque), and Desktop (Windows 7-esque). You can switch between the two at will.



    This is in contrast to Apple's obvious approach, which is to slowly blend the two without a real switch mechanism. Microsoft is just jumping ahead of where Apple is undeniably heading. Whether it's premature or not is the gamble.



    But I HAVE used Win8 builds on both touch and desktop platforms. Those of you who are saying MS should just put Windows Phone 7/8 on tablets are going to have a good laugh soon when you see metro Win8 on one.
  • Reply 8 of 56
    jcallowsjcallows Posts: 142member
    Quote:
    Originally Posted by mdriftmeyer View Post


    And more importantly, it's 5 years of R&D upon which Microsoft will have to catch up.



    unfortunately, microsoft will not need to invest in r&d and wait to catch up. they will do what they've always done-- follow apple's lead and copy.
  • Reply 9 of 56
    firefly7475firefly7475 Posts: 1,502member
    Quote:
    Originally Posted by solipsism View Post


    I'd bet that 2% Windows revenue decline still meant an increase in Windows net profit seeing how much of the R&D is already accounted for. Still, I think it's not something we've seen before with MS and may be the start of a long and unfruitful trend.



    I skimmed over a few of these stories as these stock market analyst types tend to give me a headache.



    From what I can tell though, they still had growth in the Windows division, just 2% less growth compared to the previous year.



    I find it surprising that there is still growth occuring in the PC market at this point.
  • Reply 10 of 56
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Asherian View Post


    Windows 8 has the metro UI for touch.



    People need to realize Win8 isn't just Win7 on touch devices. There's two distinct user modes: Metro (Windows Phone 7-esque), and Desktop (Windows 7-esque). You can switch between the two at will.



    This is in contrast to Apple's obvious approach, which is to slowly blend the two without a real switch mechanism. Microsoft is just jumping ahead of where Apple is undeniably heading. Whether it's premature or not is the gamble.



    But I HAVE used Win8 builds on both touch and desktop platforms. Those of you who are saying MS should just put Windows Phone 7/8 on tablets are going to have a good laugh soon when you see metro Win8 on one.



    That is not an apt comparison. Metro is webcode-based UI much like Chrome OS but using Internet Explorer. Apple uses a proper Darwin OS for the base, with frameworks and foundations that work on both Mac OS and iOS as needed, and both UIs are built using Cocoa, just that one uses a new form appropriately titled CocoaTouch
  • Reply 11 of 56
    matrix07matrix07 Posts: 1,993member
    Quote:
    Originally Posted by ArchAngel21x View Post


    If I was the CEO of Microsoft, I'd realize that success with the iPad did not come from trying to cram OS X onto it. They used iOS, and that's why Microsoft needs to put their Windows Mobile 7 OS on tablets. I think the Metro GUI is a great for post PC devices. Having said that, I drank too much Apple Kool-aid and I'm staying with iOS devices. Android, Palm, Blackberry, and Microsoft anything can kiss my ass.



    And how can they differentiate themselves from Apple? Just another iOS or Android wannabe perhaps? This way they can draw strength from their main arsenal: Windows. The question is not is it right, the question is how they can make it as good and enjoyable to use as iPad.

    If they can do that it will be a Microsoft reborn. If they can't it will be a nail in the coffin.
  • Reply 12 of 56
    mcarlingmcarling Posts: 1,106member
    Quote:
    Originally Posted by Firefly7475 View Post


    From what I can tell though, they still had growth in the Windows division, just 2% less growth compared to the previous year.



    No, revenue for MS windows shrank. With Microsoft already earning more money (through patent licensing) on Android than selling Windows Mobile, it won't be long before overall Microsoft revenues and profits are shrinking.
  • Reply 13 of 56
    jingojingo Posts: 86member
    Fourth para - "homing in", not "honing in". Honing means to sharpen, not at all the right word.
  • Reply 14 of 56
    adonissmuadonissmu Posts: 1,772member
    yeah but many people don't need w7 yet. XP is still working just fine for them.
  • Reply 15 of 56
    focherfocher Posts: 625member
    Quote:
    Originally Posted by Asherian View Post


    People need to realize Win8 isn't just Win7 on touch devices. There's two distinct user modes: Metro (Windows Phone 7-esque), and Desktop (Windows 7-esque). You can switch between the two at will.



    This is in contrast to Apple's obvious approach, which is to slowly blend the two without a real switch mechanism. Microsoft is just jumping ahead of where Apple is undeniably heading. Whether it's premature or not is the gamble.



    I think that's an overreach in describing Microsoft's versus Apple's approach. One could say that Apple is the one who jumped ahead by applying the base OS elements to mobile devices, but created a new UI and paradigm that better matched those devices. With Lion, Apple obviously selected some elements from iOS, including touch interface elements and stateless/stateful management of apps and documents, and applied those back to the desktop OS. MS seems to have learned the wrong lessons from their own disastrous tablet strategy, which is to again try to make an all-you-can-eat buffet platform. The only thing they changed is to add a touch-based UI option. Mobile devices need a lot more than that to be effective at their tasks. Power management, responsiveness, usability (not just a touch UI), and a whole different user interaction model are what has made the iOS devices stand out.
  • Reply 16 of 56
    If you view tablets as PCs and you're Microsoft, then I hope you enjoy using UIs full of crowded, tiny button bars, anachronistic mechanisms like scroll bars and right-click. And having to press ctrl-alt-del.
  • Reply 17 of 56
    firefly7475firefly7475 Posts: 1,502member
    Quote:
    Originally Posted by Suddenly Newton View Post


    If you view tablets as PCs and you're Microsoft, then I hope you enjoy using UIs full of crowded, tiny button bars, anachronistic mechanisms like scroll bars and right-click. And having to press ctrl-alt-del.



    The times, they are a changing.



  • Reply 18 of 56
    newbeenewbee Posts: 2,055member
    Quote:
    Originally Posted by Jingo View Post


    Fourth para - "homing in", not "honing in". Honing means to sharpen, not at all the right word.



    According to my dictionary, to hone means: make sharper or more focused or efficient



    In that sense "honing in" on specific data simply means "to focus" on specific data.



    For more "detailed" clarification, see Alan Greenspan below ...
  • Reply 19 of 56
    timgriff84timgriff84 Posts: 909member
    Quote:
    Originally Posted by AppleInsider View Post


    "These numbers are good. The question is, what will make Microsoft break this range in which it is stuck, between $25 and $28?" said Trip Chowdhry, managing director at Global Equities Research. "I don't see these numbers giving an indication that the stock is going to break away."



    Why would anyone want them to break out of the $25 to $28 price range. There stuck in a pattern of alternating between the 2 figures about 4 times a year, so you buy at $25 and sell at £28. Do this 4 times a year and you make a 57% profit, it's a nice reliable stock to buy. Apple on the other hand is more awkward, you know that you can make more money with it, but you never know when the dips are going to end and when the highs are going to be to sell before the next dip. With Microsoft buy at $25, sell at $28 easy money.



    Quote:
    Originally Posted by matrix07 View Post


    And how can they differentiate themselves from Apple? Just another iOS or Android wannabe perhaps? This way they can draw strength from their main arsenal: Windows. The question is not is it right, the question is how they can make it as good and enjoyable to use as iPad.

    If they can do that it will be a Microsoft reborn. If they can't it will be a nail in the coffin.



    To me Win8 on a tablet looks perfect. The iPhone was perfect because Apple recognised a phone is not a PC. MS seem to have recognised that a tablet isn't a phone and to me that is why Win8 on a tablet looks far better than the iPad. However both of them are completely screwing up with the desktop. Win8 doesn't need live tiles and why does Lion have a grid of app icons, it just reminds me of Windows 3.1. Seriously desktops, tablets and phones arn't the same thing. Why do these companies insist on trying to make them all the same.
  • Reply 20 of 56
    cykzcykz Posts: 81member
    Quote:
    Originally Posted by newbee View Post


    For more "detailed" clarification, see Alan Greenspan below ...



    Oh my... That phrase is really troublesome.
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