Microsoft profit falls ahead of Windows 8 launch
NEW YORK (AP) - Microsoft Corp.'s net income fell 22 percent in the latest quarter as it deferred revenue from the sale of its upcoming Windows 8 operating system to PC makers - and as PC sales in general took a dive.
The economic troubles in Europe also weighed on results, which missed Wall Street expectations.
The software company said Thursday that net income was $4.47 billion, or 53 cents per share, in the fiscal first quarter, which ended Sept. 30. That was down from $5.7 billion, or 68 cents per share, a year ago.
Analysts were on average expecting 56 cents per share, according to FactSet.
Revenue fell 8 percent to $16 billion, missing the average analyst estimate of $16.5 billion.
Microsoft's stock initially fell more than 3 percent in extended trading after the release of the results but recovered to $29.04, which was 46 cents, or 1.5 percent, below its price at the close of regular trading.
Analyst Collin Gillis at BGC Financial said executives reassured investors on a conference call, noting that trends in Microsoft's Server and Tools business, which has been the fastest-growing division, were better than they appeared at first glance.
That division makes software for servers and software developers, and is moving from licensing it out program by program to striking multi-year licensing deals. That's curbing the growth rate for now but sets the company up for better performance in the future, Gillis said.
Analysis of the Windows results were complicated by the deferral of $783 million in license fees for PCs pre-loaded with Windows 8. Microsoft, which is based in Redmond, Wash., can't recognize the revenue until the units go on sale on Oct. 26.
It also deferred $384 million in license fees from PCs that shipped with Windows 7 but are eligible for a $15 upgrade to Windows 8, and $189 million for the PCs that shipped with the new version of Office or are eligible for an upgrade.
Excluding those deferrals and other adjustments, net income was $6.66 billion, or 65 cents per share, down 7 percent from last year. Revenue was flat with last year's figure at $17.3 billion.
Excluding the deferrals, revenue for the Windows division fell 9 percent from a year ago, roughly in line with the decline in global PC shipments in the third quarter reported by research firms Gartner and IDC. Consumers held off buying PCs ahead of Windows 8 and probably steered some of their electronics dollars toward tablets and smartphones.
Windows 8 is the most significant revamp since Windows 95 and sports a completely new look that's intended to be consistent across PCs, tablets and smartphones. It's designed from the ground up for touch-sensitive screens, and Microsoft has high hopes that it will keep Windows relevant in a world where tablets are starting to eat into PC sales. It's also making its own tablets for the first time, and is set to launch them along with Windows 8.
In the Business Division, Microsoft's largest, posted a 1 percent increase in revenue, excluding the deferrals for Office.
The economic troubles in Europe also weighed on results, which missed Wall Street expectations.
The software company said Thursday that net income was $4.47 billion, or 53 cents per share, in the fiscal first quarter, which ended Sept. 30. That was down from $5.7 billion, or 68 cents per share, a year ago.
Analysts were on average expecting 56 cents per share, according to FactSet.
Revenue fell 8 percent to $16 billion, missing the average analyst estimate of $16.5 billion.
Microsoft's stock initially fell more than 3 percent in extended trading after the release of the results but recovered to $29.04, which was 46 cents, or 1.5 percent, below its price at the close of regular trading.
Analyst Collin Gillis at BGC Financial said executives reassured investors on a conference call, noting that trends in Microsoft's Server and Tools business, which has been the fastest-growing division, were better than they appeared at first glance.
That division makes software for servers and software developers, and is moving from licensing it out program by program to striking multi-year licensing deals. That's curbing the growth rate for now but sets the company up for better performance in the future, Gillis said.
Analysis of the Windows results were complicated by the deferral of $783 million in license fees for PCs pre-loaded with Windows 8. Microsoft, which is based in Redmond, Wash., can't recognize the revenue until the units go on sale on Oct. 26.
It also deferred $384 million in license fees from PCs that shipped with Windows 7 but are eligible for a $15 upgrade to Windows 8, and $189 million for the PCs that shipped with the new version of Office or are eligible for an upgrade.
Excluding those deferrals and other adjustments, net income was $6.66 billion, or 65 cents per share, down 7 percent from last year. Revenue was flat with last year's figure at $17.3 billion.
Excluding the deferrals, revenue for the Windows division fell 9 percent from a year ago, roughly in line with the decline in global PC shipments in the third quarter reported by research firms Gartner and IDC. Consumers held off buying PCs ahead of Windows 8 and probably steered some of their electronics dollars toward tablets and smartphones.
Windows 8 is the most significant revamp since Windows 95 and sports a completely new look that's intended to be consistent across PCs, tablets and smartphones. It's designed from the ground up for touch-sensitive screens, and Microsoft has high hopes that it will keep Windows relevant in a world where tablets are starting to eat into PC sales. It's also making its own tablets for the first time, and is set to launch them along with Windows 8.
In the Business Division, Microsoft's largest, posted a 1 percent increase in revenue, excluding the deferrals for Office.
Don't forget the ME fiasco, when MS does a faceplant they do a big one.Â
After the Vista fiasco, I'm holding off on any OS upgrades until 8 has been proven to be reliable and user-friendly.
Actually I think it was 2004 when Gates looked at what the tablet group had developed and did not like it because it did not look like his âWindowsâ. He told them to drop everything and not return to that system. It that time they had a working touch screen interface which if they had continued would have made them the leaders in smart phones and tablets. Donât get me wrong, Ballmer is a bad joke, sitting in the back of the âfridge way too long, but Gates is the one who really blew it.Â
When, when will Ballmer be shown the door. I read a month back that the board decided to give him only 91% of his bonus this year - last year he got 100%. I get Microsoft is still a money making machine of epic scale, but it is very clear the company has been drifting in the wrong direction for years and under Ballmer's, ehem, leadership, has squandered the technology lead Microsoft had on smartphones, tablets, mobile and embedded devices, and almost missed the shift to cloud computing. There are successes, like Office,which has done an excellent job of walking the line between cloud and client offerings, and XBox, where XBox Live is basically paying the bills for the entire entertainment and devices group. The lessons learned in Zune weren't in vain, finding their way into Windows Phone and Windows 8, but seems like a case of too little too late.
Â
If you dive into the bowels of Microsoft's revenues, it is coming mostly from their investment arm, and managing the big pile of cash they are sitting on - not from stellar corporate performance. Ballmer needs to go.
net income was $4.47 billion, Still.
Just another sign of the times.
The days of blow-out numbers are over. My guess is, forever... that's the nature of technology.