Microsoft's earnings numbers, although strong, also marked a decline in the Windows segment. This is drawing analyst attention.
Microsoft's quarterly numbers may rival the GDP of a small
nation, but some numbers for the most recent quarter have analysts suggesting
the company needs to expand beyond the traditional lines of business that fuel
so much of its bottom line.
Microsoft's third-quarter revenue hit $16.43 billion, a
year-over-year increase of 13 percent. Net income rose 31 percent, to $5.23
billion. Revenue for the company's Business Division rose 21 percent
year-over-year, a solid figure nonetheless thoroughly outpaced by the
Entertainment and Devices Division, which reported a 60 percent year-over-year
Sales of Office 2010 and the Xbox Kinect hands-free
controller helped drive much of that revenue, but buried within those rosy
numbers is at least one statistic that could prove troublesome for Microsoft if
it continues in future quarters: The Windows segment reported a 4 percent dip,
something Microsoft explained in a statement ahead of its April 28 earnings
call as "in line with PC trends."
Although Windows 7 has sold some 350 million licenses since
its October 2009 launch, global sales of PCs declined over the last quarter.
Microsoft estimated that PC dip at between 1 and 3 percent, while analyst firm
IDC suggested 3.2 percent.
"A spike in fuel and commodity prices and disruptions in
Japan" were at least partially responsible for the slackening, according to IDC,
along with a "cautious business mentality and waning consumer enthusiasm."
Other analysts echoed those sentiments.
"Much of the prior PC dynamics continue to impact its
Windows business performance," Gleacher & Co. analyst Yun Kim wrote in an
April 29 research note. "This negative trend is more than offsetting positive
impact coming from the strong corporate PC refresh cycle and enterprise
adoption of Windows 7."
The rise of tablets is also having an effect on that market
segment. "New form factors, i.e., tablets are having some impact on its
consumer business," Kim wrote. "Specifically, netbooks declined 40 [percent] in
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.