Tech Earnings: Microsoft in Focus

 

 Yesterday proved to be a big earnings day for tech giants Microsoft, IBM, Intel, and Google. Many investors and business leaders are looking closely at the earnings results of the these four tech giants to gain a more complete picture about the state of the global economy and the amount of business investment that is occurring in technology.

IBM, Microsoft, and Intel all reported slower quarterly revenue growth. Due to time limitations, I have chosen to focus on only one tech company, Microsoft, in hopes of providing a more comprehensive snapshot of their recent quarterly earnings.

Microsoft

Microsoft announced a slight drop in net income compared to the previous quarter. Second quarter net income ending Dec 31st declined slightly to $6.62 billion, or 78 cents a share from $6.63 billion in the previous year period. Still 78 cents per share was better than the 76 cents per share analysts were expecting. Shares rose 2.42 % in after hours.

Strong sales of X-box during the holiday season helped to generate more profits for Microsoft.

Xbox 360 installed base totals approximately 66 million consoles and 18 million Kinect sensors.

Xbox LIVE currently has 40 million members worldwide, an increase of 33% from the previous year period.

The company said revenue was up 5 percent at $20.89 billion which was short of their revenue forecast of $20.93 billion.     

Weakness with Windows

The Windows and Windows Live Division posted revenue of $4.74 billion, a 6% decline from the previous period.Weaker consumer spending with inexpensive net-books was partly to blame for the decline.

Mobile computing continues to gain traction through the growing rise of i-Pads, Android based tablets, e-readers, and smart phones. The wide scale proliferation of mobile computing across the developed world has hurt PC sales.

Currently, Apple has a solid market share advantage over Microsoft with popular consumer mobile devices such as i-Pads and i-Phones. 

In the fall of 2010′ Microsoft launched Windows 7 Phone which received somewhat disappointing results. 

Microsoft’s late push in the smart phone industry did not help to bridge the wide sales gap that separated Windows 7 Phones from Apple’s i-Phones and Google’s Android Phones.

Windows 7 phones represent less than 4% of  U.S. smart phone market share.

Microsoft is hoping that their success in mobile will change for the better as they enter into a new partnership with Nokia and their new line up of smart phones.

Recently, I reviewed the new Nokia Lumia 900 phone during an earlier post on this blog last week which can be viewed by scrolling down on this blog.

The Nokia Lumia 900 phone is receiving good reviews but it is not yet available for purchase in U.S. stores. The pricing for the Nokia Lumia has also not yet been announced.

Windows 8

Many analysts and tech followers are widely anticipating that Windows 8 will be a well received Microsoft product after it is released sometime in 2012. Windows 8 may even become a game changer for Microsoft. 

Windows 8 is expected to be cloud based software and operate on a variety of Microsoft platforms, including mobile ones such as Windows Tablets (not launched yet), Windows Phones, PC’s, and perhaps even X-box.

Yesterday Robert Breza, a tech analyst from RBC Capital Markets, spoke to Emily Chang on Bloomberg West about his expectations for Windows 8.

“What we want to see is tighter integration with Skype and Facebook. What we want out of Windows 8 is a unified experience across devices whether it is X-box, PC’s, or mobile” Breza said.

“They have a great opportunity to capture that and we want to make sure they get it right”  Breza noted.  

Breza said that he is willing to wait a quarter or two for Microsoft to get Windows 8 completed the right way.

 According to yesterday’s earning report, demand for Microsoft business products appears to be robust.

Microsoft’s Server & Tools business posted $4.77 billion in second quarter revenue, an 11% increase from the previous year period.

“We saw strong demand for our business products and services, despite the soft PC market and continuing economic uncertainty in key parts of the world,” said Peter Klein, chief financial officer at Microsoft.

Business Outlook

Microsoft is revising operating expense guidance downward to $28.5 billion to $28.9 billion for the full year ending June 30, 2012.

 

 

About Johnathan Schweitzer 1561 Articles
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