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October 26, 2008

Microsoft reports strong 1Q09, cuts outlook

Posted by David Hunter at 5:04 PM ET.

Microsoft logo Last week, Microsoft reported strong, if not blemish-free, financial results for the 1st quarter of fiscal 2009 (ending Sept. 30, 2008) and as expected cut its outlook for the 2nd quarter. The good news was that the outlook was not as dark as Wall Street had expected:

Technology investors are so tired of the drumbeat of bad news that has continued to roil tech stocks that they grasped at the tiniest bit of optimism in Microsoft Corp.’s predictions for its second quarter.

Microsoft said in its fiscal first quarter earnings report that it expects to see second quarter revenues in the range of $17.3 billion to $17.8 billion, while analysts had previously been forecasting revenues of about $17.9 billion. But because its lowered forecast was not as bad as the worse case scenario feared on Wall Street, the stock ended up getting a small boost in after-hours trading.

As for 1Q09 itself, earnings per share were 49 cents beating the analyst consensus of 48 cents.  Still, there were some distinct oddities revealed in the segment results as discussed below with quotes from the 10-Q filing.


(millions) % change 1Q09 1Q08

Revenue %2 $4,218 $4,139
Operating Income (4) 3,267 3,388

Since the estimated PC shipment growth rate was 10-12%, the big question is where did all the money go? Microsoft merely states:

Client revenue increased reflecting growth in licensing of Windows Vista. Revenue from commercial and retail licensing of Windows operating systems increased $125 million or 22%. OEM revenue decreased $46 million or 1% while OEM license units increased 8%. The decline in OEM revenue reflected the four percentage point decrease in the OEM premium mix to 71% as well as changes in the geographic and product mixes.

I’d conjecture that piracy, Apple, and netbooks (running Windows XP) all played a part, but the bottom line is that Windows revenue grew markedly less than the PC shipment rate which is not good news. Beyond that, income growth was negative due to increased expenses included a 20% increase in R&D expenses that was headcount-related. Not a disaster, but not a pretty picture either.


Business (mostly Office):

(millions) % change 1Q09 1Q08

Revenue %20 $4,949 $4,117
Operating Income 23 3,311 2,700

Old reliable Office brought home the bacon with the help of $214 million from currency exchange rates. Of note is that, "Consumer revenue increased $288 million or 36%, reflecting increased sales primarily due to promotional pricing programs for the 2007 Microsoft Office system." Expenses increased apparently mostly driven by the troubled acquisition of FAST.


Server and Tools:

(millions) % change 1Q09 1Q08

Revenue %17 $3,406 $2,900
Operating Income 20 1,151 959

Server and Tools continued its winning ways helped out by $119 million growth in revenue from the low margin consulting and Premier and Professional product support services.


Entertainment and Devices (mostly Xbox):

(millions) % change 1Q09 1Q08

Revenue %(6) $1,814 $1,929
Operating Income 7 178 167

I have to quote extensively for this odd tale:

Xbox 360 platform and PC game revenue decreased $331 million or 22%, primarily as a result of the $330 million of incremental revenue from the launch of Halo 3 in the first quarter of fiscal year 2008 and decreased revenue per Xbox 360 console as a result of price reductions during the past 12 months. We shipped 2.2 million Xbox 360 consoles during the first quarter of fiscal year 2009, compared with 1.8 million Xbox 360 consoles during the first quarter of fiscal year 2008. Other EDD product revenue increased $216 million or 51%, led by increased sales of application software for Apple’s Macintosh computers, the Zune digital music and entertainment platform, and mobile and embedded device platforms.

That has to be Mac Office, which somehow found its way to shoring up the Entertainment and Devices bottom line.

For the remainder of fiscal year 2009, we expect revenue to be flat or to decrease relative to the prior fiscal year due to year-over-year variations in launches, volumes, mix, and prices across our portfolio of products and services. We expect sustained profitability for fiscal year 2009.

Undoubtedly marginal, low growth profitability even adding in Mac Office.


Online Services:

(millions) % change 1Q09 1Q08

Revenue %15 $770 $671
Operating Income (80) (480) (267)

Online advertising revenue grew 15% ($72M) and aQuantive agency revenues nearly doubled to $98M, but cost of revenue increased by $251 million "primarily driven by increased data center and equipment costs and other expenses ate up that and more. The outlook was for more of the same.


Corporate Level Activity (overhead and legal):

(millions) % change 1Q09 1Q08

Corporate level results %(30) $(1,428) $(1,098)

No particular item of corporate overhead was called out for the whopping big increase.

Bottom Line: By and large it’s the usual Microsoft story except for the weakness in Client results. Entertainment and Devices continues to underperform Microsoft’s software businesses and the Online Services sinkhole can only be justified as "building for the future."

Filed under Acquisitions, Financial, General Business, Microsoft, Office, Office for Mac

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August 2, 2007

Microsoft delays Office 2008 for Mac

Posted by David Hunter at 10:29 AM ET.

In January, Microsoft’s MAC Business Unit (BU) promised that Office 2008 for the Mac would ship in 2H2007. Today that date slipped to a plan for a launch at Macworld in mid-January 2008 with general availability in 1Q2008. The delay is blamed on quality issues related to the new XML document formats introduced with Office 2007 for Windows and Apple’s switch to Intel processors.

Mac fans are typically grumpy about what seems to be second class treatment, but here’s an interesting factoid (from the second link above):

Sales of Office for Macs rose about 72 percent from 2001 to 2006, compared with an increase of about 18 percent for Windows versions. Sales of the Mac versions made up about 20 percent of dollars spent on Office at U.S. retail stores and Web sites in 2006, up from 4 percent in 2001.

That’s probably not enough to banish all conspiracy and neglect theories, but it certainly isn’t chump change.

Filed under Apple, Coopetition, Microsoft, Office, Office for Mac

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January 10, 2007

Office 2008 for Mac promised for 2H07

Posted by David Hunter at 4:47 PM ET.

Steve Jobs may get the spotlight, but Microsoft also had an announcement at Macworld yesterday – It’s Coming: Mac BU Announces Intent to Deliver Office 2008 for Mac:

Microsoft Corp.’s Macintosh Business Unit (Mac BU) today revealed at Macworld Conference & Expo 2007 the news Mac fans have been waiting to hear: A new version of Office for Mac is on its way. The Mac BU announced its intent to deliver the first Universal version of Office for Mac for PowerPC- and Intel-based Macs — Microsoft® Office 2008 for Mac. Scheduled to be available in the second half of 2007, Office 2008 for Mac will allow Mac users to work smarter and more efficiently with new and enhanced tools that are simple, intuitive and easily discovered.

More details including some Mac-first, Mac-only features by following the link.

As for the grumbling over the perceived delay in providing Mac Office converters for Office 2007 file formats, Microsoft’s Roz Ho addressed that and other topics in a Q&A:

We’re building file-format converters that will allow Mac users to access Office Open XML Format following the general availability of the 2007 Office system at the end of January. We will release a public beta version of the converters in the spring of 2007, and final versions of the converters will ship six to eight weeks after Microsoft Office 2008 for Mac is available. For now, we recommend that Mac users advise their friends and colleagues using the 2007 Office system to save their documents as a “Word/Excel/PowerPoint 97-2003 Document” (.doc, .xls, .ppt) to ensure the documents can be easily shared across platforms.

That still seems to be a pretty large gap.

Filed under Apple, Coopetition, Microsoft, OOXML, Office, Office for Mac, Standards

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December 9, 2006

Microsoft Weekly Miscellany, December 9, 2006

Posted by David Hunter at 5:58 PM ET.

Microsoft released a beta of Windows Live Search Books (formerly MSN Book Search) which indexes out-of-copyright books and a new beta of Windows Live Search Academic (formerly Windows Live Academic Search) which indexes academic journals.

Also in Windows Live Land, Windows Live Custom Domains got an update as did Windows Live Expo and the beta of Windows Live Connection Center Wi-Fi.

Despite the recent demise of Google Answers, Amazon has launched a new question and answer service:

Check out Amazon’s newest service, Askville.

… This is a “questions & answer” site similar to Yahoo, Yedda, AnswerBag, the recently departed Google Answers and even the rarely mentioned Microsoft QnA.

Users turned grumpy over perceived delays in Office 2007 compatibility for Mac Office and Windows Mobile.

Jim Allchin explains Vista Power Management at incredible length since Microsoft has “enhanced” the operating system’s “power off” switch.

Microsoft, HP and other tech firms plan to push for a new US data privacy law next year.

Another strange Zune ad. Don’t worry, you likely won’t have to restrain yourself from filling your shopping cart with Zunes, but you may want a cookie.

Alcatel may be suing Microsoft but they are still jointly selling IPTV.

Filed under Alcatel-Lucent, Argo, Coopetition, General Business, Google, Governmental Relations, IPTV, Legal, Live Search, MSN, MSN Book Search, Marketing, Office, Office for Mac, Privacy, Technologies, Windows Live, Windows Live Connection Center Wi-Fi, Windows Live Custom Domains, Windows Live Expo, Windows Live Search Academic, Windows Live Search Books, Windows Mobile, Zune

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