I’ve belabored the numbers in the 2Q FY07 Microsoft earnings report, but some of the juiciest tidbits are in the forward looking guidance:
Microsoft Corp. on Thursday cut its fiscal 2007 forecast for Xbox 360 video game console shipments, citing unsold inventories in stores, and said it is trying to make sure its gaming division turns a profit in the upcoming fiscal year.
Chief Financial Officer Chris Liddell said Microsoft aims to ship a total of 12 million Xbox 360s by the end of its fiscal year on June 30, down from a previous target of 13 million to 15 million.
“We’re very glad to see Microsoft is trying to rein in Xbox so it can be a profitable concern rather than a market-leading, money-losing concern,” said Kim Caughey, an analyst at Fort Pitt Capital, which manages more than $1 billion in assets, including shares of Microsoft.
Microsoft is continuing to lose market share in the search business to industry rival Google, something the software maker’s financial chief (CFO Chris Lidell – ed.) said Thursday he is “not happy” about.
And things aren’t expected to turn around any time soon. Microsoft said Thursday that its Internet services business will produce less sales growth over the next two quarters than the company had previously forecast.
Where it once forecast that revenue might grow by as much as 11 percent, the company now sees full-year sales growth in its Internet services business of just 3 percent to 8 percent.
“Success continues to elude Microsoft in this market,” Technology Business Research analyst Allan Krans said in an e-mail interview. He said Microsoft is hardly alone, with other rivals also struggling to keep pace with Google.
Yet another ouch!
While I love hitting the “ouch” button, these conclusions aren’t really any surprise and it’s good news for Microsoft that they aren’t proceeding blindly no matter how disappointing it may be to the fans of the respective products. Of course, the big test will come when it finally comes time to prune some nonproductive branches.