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Microsoft’s Steve Ballmer and Robbie Bach delivered the keynote last night at the 2010 Consumer Electronic Show in Las Vegas and it was the usual mixture of self-congratulatory boosterism and product and technology demos. Here is my list of highlights:
Windows 7
After a report on how well Windows 7 is selling, there were the PC demos including a prototype Hewlett-Packard slate PC that the technical press was pining for.
It looks like a touch enabled netbook to me and while it may have a niche, I suspect I would be screaming for a keyboard (or at least a stylus) in under a minute of usage. Perhaps more interesting were the ultrathin Lenovo A300 laptop with a 21.5" screen and the Sony VAIO home entertainment notebook with a 24" screen. How big does a laptop have to get before it becomes a single element desktop?
Bing
HP is making Bing the default Web search engine and MSN the default home page on all their PCs in 42 countries.
Xbox
Ballmer put the usual lipstick on this pig and Robbie Bach appeared later to flog upcoming games (including another lucrative Halo version) and tout Project Natal, the motion sensing technology that will appear later this year to replace the standard controllers for some games.
Windows Mobile
Zzzzzz.
Mediaroom 2.0
Bach also announced Mediaroom 2.0, the latest version of Microsoft’s IPTV offering for service providers which now supports PCs and smartphoes as well as set top boxes and Xbox consoles for TV viewing.
Summary
Microsoft really did not have much of its own to show again this year. I am almost beginning to miss the goofy Bill Gates future technology skits.
Kevin Johnson left Microsoft a year ago and his old Platforms & Services Division fragmented with three senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte reporting directly to Steve Ballmer for Windows/Windows Live. Today, Microsoft announced that the musical chairs had ended and Steven Sinofsky is now President of Microsoft’s Windows Division:
Microsoft Corp. today promoted Steven Sinofsky to president of the Windows Division. Sinofsky, a 20-year Microsoft veteran, most recently led the Windows and Windows Live Engineering Group, contributing to the Oct. 22 availability of Windows 7.
As president, Sinofsky assumes responsibility for the Windows business including both the engineering and marketing functions for Windows, Windows Live and Internet Explorer.
As for the other two Senior VP who had reported to Ballmer:
Tami Reller, currently chief financial officer (CFO) for the Windows Division, will take on the additional responsibility for marketing. Bill Veghte will be moving to a new leadership role in the company to be announced later this year. The transition between Reller and Veghte is timed to take place in late July when Windows 7 reaches the release to manufacturing (RTM) milestone. … She will report to Sinofsky and will retain her responsibilities as CFO.
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Jon DeVaan will continue in his role as senior vice president, reporting to Sinofsky. DeVaan managed the engineering team responsible for creating the core components of both Windows 7 and Windows Server 2008 R2.
The official Microsoft press release announcing 2Q09 results and the layoffs is now available:
Microsoft Corp. today announced revenue of $16.63 billion for the second quarter ended Dec. 31, 2008, a 2% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8%, 11% and 6%, respectively, compared with the prior year.
Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks. However, strong annuity licensing drove Server & Tools revenue growth of 15%. Entertainment and Devices revenue grew 3% driven by strong holiday demand for Xbox 360 consoles with a record 6 million units sold in the quarter.
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In light of the further deterioration of global economic conditions, Microsoft announced additional steps to manage costs, including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing. As part of this plan, Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.
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Due to the volatility of market conditions going forward, Microsoft is no longer able to offer quantitative revenue and EPS guidance for the balance of this fiscal year. Microsoft offers operating expense guidance of approximately $27.4 billion for the full year ending June 30, 2009. This information supercedes the fiscal year 2009 guidance that Microsoft provided on Oct. 23, 2008.
I’ll have to examine the detailed earnings report, but frankly, the results don’t look that bad which makes the layoffs seem disproportionate although this is a certainly a convenient time for some housecleaning. However, revealing only 1,400 of the 5,000 today and deferring the rest for up to 18 months is not the way to enhance employee morale or productivity.
Meanwhile, Microsoft CEO Steve Ballmer tried to reassure employees in a letter:
During the second quarter we started down the right path. As the economy deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $600 million. I appreciate the agility you have shown in enabling us to achieve this result.
Now we need to do more. We must make adjustments to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency.
As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We’ll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.
I’m sure that the shareholders hope that "key investment areas" does not mean that Microsoft management is robbing the cash cows to prop up the dubious "big bets."
Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.
To increase efficiency, we’re taking a series of aggressive steps. We’ll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We’ve scaled back Puget Sound campus expansion and reduced marketing budgets. We’ll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.
No merit increases even for the profitable divisions - that ought to build morale too. We’ll have to wait for all the details to emerge, but at first glance this whole action seems to be rather ham handed. More of Ballmer’s letter by following the link.
Microsoft CEO Steve Ballmer gave his maiden Consumer Electronic Show keynote yesterday and if it was just as soporific as Bill Gates’ past performances, it mercifully skipped the goofy "future tech" skits that Microsoft’s PR folks used to put Gates through. In a nutshell, the message was "Windows 7, Windows 7, Windows 7" plus the obligatory appearance by Microsoft’s Entertainment & Devices chief Robbie Bach to once again whistle past the graveyard and say that everything on his patch was swell.
“I’m thrilled to announce the availability of the Windows 7 beta, which is on track to deliver simplicity and reliability,” Ballmer said. “Windows 7 and Windows Live are part of an incredible pipeline of consumer technology that is making it easier than ever for people to communicate, share and get more done.”
The beta version of Windows 7, Microsoft’s next-generation PC operating system, can be downloaded today by MSDN, TechBeta and TechNet customers. Consumers who want to test-drive the beta will be able to download it beginning Jan. 9 at http://www.microsoft.com/windows7.
Microsoft also announced the global availability of Windows Live, a free suite of communications and sharing applications.
Actually that’s not all the ten thousand different Windows Live applications, but just Windows Live Essentials, the bundle of Windows applications you will have to download to give Windows 7 the same functionality as Windows XP. In which respect there was good news for Dell customers:
In February, to offer a comprehensive experience for consumers to connect, share and personalize their content, Dell will offer preloaded Windows Live Essentials (a free suite of applications for instant messaging, e-mail and photos that complement Windows Live on the Web) and Live Search on a majority of its new consumer and small-business PCs globally.
No word on how much money changed hands, but bear in mind that Dell is paying to put Windows on their PCs so with this deal they are merely getting a discount for also preloading Live Essentials and Live Search. I am sure Microsoft’s lawyers are making sure it is a separate accounting entry however.
Also announced was the Verizon mobile search deal leaked yesterday:
Under a new five-year relationship that covers mobile search and advertising, Verizon subscribers in the U.S. will be able to use Live Search to search for local business and shopping information; access maps and directions; perform general Internet searches; and find ring tones, games, wallpaper and other online mobile products and services.
More succinctly, Microsoft’s Live Search will become the preferred Web search on Verizon mobiles.
