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Microsoft's Quarterly Results: A Disappointment in Summary

The winning hand



Summary: Negative press which is mostly obscured by Vista 7 marketing; Microsoft's lesser-explored business units are actually on the decline, as is Microsoft's stock

AS we promised earlier on, here is a quick look at the results Microsoft reported last week. The Times Online says that "Microsoft profits fail to impress" and John Letzing from MarketWatch says exactly the same thing (also in the headline): "Microsoft's numbers fail to impress"



Needless to say, this is not the story Microsoft told the public. Microsoft is obliged to embellish, to spin, and sometimes to lie (as long as it's not a crime). According to the Wall Street Journal, Microsoft did not do enough, so the stock went down. All which came out of Microsoft's mouth was "Windows 7 this and Windows 7 that..."

It's a decoy.

Terry Porter's example from the other day showed that some businesses are very unhappy with Vista 7 (enough for them to move to another operating system or go back to XP). InfoWorld (IDG) has this new article which is titled: "Where are my Windows 7 print drivers?"

Many HP printers still lack drivers even for Vista. Here's why so many printers are abandoned with each new operating system


This is the type of problem Porter cited the other day. Vista 7 suffers from some of the same problems that Vista suffered from. It is, in essence, just another Vista.

“...Microsoft's results were down very sharply the year before (declining by about a third).”Anyway, Microsoft used these latest financial results that are generally disappointing to hype up Vista 7. The intention was to place focus on just one part of Microsoft's business (many articles sing that same tune), which is not comparable on a year-to-year basis because last year there was a 2-year-old Vista, which cannot be equated to a new release in a much better marketplace (recovery of the Dow Jones for starters, an index which rose more sharply than sales of Windows).

As an important reminder, Microsoft's results were down very sharply the year before (declining by about a third). That was in April 2009. So resurgence this year hardly means much, unless someone is spinning it and the spin eventually prevails at the expense of objective interpretation.

Looking outside the 'box' which is Vista 7, Microsoft's business performed rather badly [1, 2] and here is how Microsoft boosters put it:

Server & Tools: This division, which includes Windows Server, SQL Server and related products, was once renowned for stringing together consecutive quarters of double-digit revenue growth. No more.


Quoting the above, Pamela Jones wrote in Groklaw: "So, SCO's attacks on Linux didn't help longterm, eh?" (she is referring to the SCO case which Microsoft played a role in)

"Bing Loses More Money as Microsoft Chases Google," says this report.

During Microsoft's fiscal third quarter, which ended March 31, the Online Services Division, or OSD, reported a 12 percent increase in revenue, which rose to US$566 million on the back of higher advertising revenue. That wasn't enough to offset a surge in operating expenses during the period. The division's quarterly loss grew by 73 percent to $713 million, compared to a loss of $411 million during the same period last year.


Indeed. As we pointed out before, Microsoft is approaching the loss of $3 billion per year when it comes to the Internet business. Here is how Business Insider puts it:

Microsoft's Bing/MSN Results Truly Horrifying -- Loss Rate Balloons To ~$3 Billion A Year



[...]

Microsoft's online services division losses exploded to $713 million, up from $411 million a year ago. That's almost a $3 billion loss run-rate.


And some people still call Bong [sic] a success. How many billions is Microsoft willing to lose before giving up? Microsoft has billions in debt.

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