Microsoft announces quarterly results July 22, and analysts expect refreshed business spending on software to affect its bottom line. Windows 7 and other desktop products remain Microsoft's fiscal foundation.
Microsoft will announce its quarterly results July 22, and analysts are
expecting the company to post revenue of $15.27 billion. If that number proves
accurate, then Microsoft will find itself surpassed by Apple, which announced
quarterly revenue of $15.7 billion earlier this week.
Ten years ago, Apple seemed to be circling the proverbial drain, while
Microsoft remained comfortably dominant in the PC space. Analysts and pundits
will likely spend the next several days talking about how Apple's reversal of
fortune-as well as some of Microsoft's current problems-stem from the eclipsing
of the PC by the mobile device.
But Microsoft continues to dominate the desktop space, and analysts expect
Microsoft's quarterly earnings to reflect that fact. A slowly reviving economy
will also apparently contribute to the company's bottom line; there have been
signs that business spending on software, anemic up to this point, may be on
the upswing. In 2009, Microsoft faced several quarters of fiscal devastation as
both businesses and consumers cut back on PC purchases and software
"We expect to see further evidence that an enterprise PC and server
replacement cycle is upon us," Katherine Egbert, an analyst with Jefferies
& Co., wrote in a July 19 research note. "Recent reports by Intel and
others indicate that the much-anticipated PC and server upgrade cycle has
As with past quarters, Microsoft will likely rely on its flagship
products-notably Windows 7, which has sold 100 million licenses worldwide since
its October 2009 release-for the lion's share of its revenue. New products have
not proven to be runaway bestsellers, at least not yet.
"We think it's too early to see a boost from Kinect (formerly Project Natal)
units, which are slated to start shipping in early November," Egbert wrote. "We
don't see Bing search or Azure cloud services adding meaningfully, despite
recent market share gains and customer wins." Nor did Egbert expect to see any
upside in revenue from Office 2010, "although a [fiscal year end] wave of
volume license agreements that include Office 2010 could benefit unearned
Microsoft is in the process of shifting its corporate strategy to focus
ever-more-exclusively on the cloud. During the company's Worldwide Partner
Conference (WPC), which took place in Washington,
D.C., July 11-15, Microsoft CEO Steve
Ballmer suggested an intensive focus on bringing cloud-based services to
businesses, centered on platforms such as Azure.
"We've been shouting about -O Cloud' at the WPC
now for about four years," Ballmer
told an audience during his July 12 keynote
. "There's no question that Microsoft
has chosen to embrace that path together with all of you, and there's no
question that there's more to do."
Companies such as Amazon.com offer infrastructure as a service, and
companies such as Salesforce.com offer software as a service, but Microsoft
used the WPC to tout its own self-described
cloud niche, "IT as a service"-in essence, offering Azure and other cloud-based
products as a way for enterprises to fulfill multiple functions.
But how quickly are businesses choosing to embrace the cloud? A
recent survey by Tech Target featured 69 percent of respondents "not
considering" cloud computing
, while 10 percent said they planned to
implement private clouds and 6 percent said they were planning to implement public
clouds within the next 12 months.
Actual revenue numbers from initiatives such as Azure could give a better
idea of early adoption rates for Microsoft's cloud products. In the meantime,
however, Microsoft continues to rely on the desktop for its financials.