Microsoft announces another quarter of revenue declines, but results were still stronger than expected, thanks to what Microsoft executives referred to as "cost discipline" and a streamlining of business divisions. With the release of Windows 7 on Oct. 22, consumers and businesses may be in the mood to buy new PCs and Microsoft products.
reported another quarter of declining revenue for the first quarter of fiscal
2010. Nonetheless, Wall Street analysts and Microsoft executives both seemed
satisfied with the results, which were stronger than earlier estimates. The Oct.
23 announcement came a day after Microsoft launched Windows 7, the newest
version of its operating system.
Microsoft's revenues of $12.92 billion represented a 14 percent decline
year-over-year from 2008. Operating income, net income and diluted earnings per
share for the quarter declined 25 percent, 18 percent and 17 percent,
respectively, over the same quarter in 2008. Nonetheless, opening trading on
Wall Street saw Microsoft's shares leap 8 percent.
In a statement before the Oct. 23 earnings call, Microsoft Chief Financial Officer
Chris Liddell suggested that the company had "maintained our cost
discipline, which allowed us to drive strong earnings performance despite
continued tough overall economic conditions."
For the fourth quarter of 2009, Microsoft had reported a 17 percent decline
in year-over-year revenue, with earnings of $13.10 billion. The economic
recession and attendant decline in PC sales has had an accompanying effect on
Microsoft's bottom line, reducing demand for its core products such as
here to see 12 ways Windows 7 can make life easier for IT pros.
Microsoft reported that it was deferring $1.47 billion in revenue due to the
Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers
before the operating system's launch date of Oct. 22. With that money
reintegrated into the bottom line, Microsoft's overall revenues became $14.39
billion, a year-over-year decline of only 4 percent.
During the earnings call, Liddell suggested that there could be proverbial
"green shoots" ahead for Microsoft if the economy and PC sales pick
up in 2010.
"Windows division revenue will be in line with overall PC growth,"
Liddell said, adding, "Our strategies will position us to take advantage
of the economic recovery."
With regard to the larger industry, Liddell suggested that "CIOs remain
cautious about spending through the end of the year," which may set the expected
beginning of a tech refresh throughout the enterprise and small and midsize
businesses in 2010. Liddell also suggested that a tech refresh might be a more
gradual process extending beyond 2010 into the next few years.
In line with that thinking, Microsoft is staying "reasonably
cautious" about the Windows 7 upgrade cycle, according to Liddell. Even
so, "Feedback is good at this stage from corporate in terms of Windows
Microsoft's Windows XP currently runs on 80 percent of all commercial PCs,
according to a report from research company Forrester. Despite the stability of
that platform, however, support from Microsoft and ISVs will gradually decline,
support for Windows XP Service Packs 2 and 3 ending in April 2014.
That ending of support, combined with new business-focused features in
Windows 7, may finally persuade businesses that base their IT infrastructure on
Microsoft's products to complete the transition to the newer operating system.
Windows 7 features cited by analysts as particularly useful to the
enterprise include DirectAccess, which attempts to simplify connectivity for
Mobile users, BitLocker and BitLocker To Go, which secure data on hard drives
and removable USB thumb drives, and
AppLocker, which delivers more granular control of user applications.
A Forrester survey of 653 PC decision makers at North American and European
enterprises and SMBs found that six out of 10 companies plan on moving directly
to Windows 7. In that survey, 1 percent of respondents reported they planned to
"skip Windows 7 and wait for the next release," and 1 percent planned
"to migrate from Windows to a different platform."