Microsoft Profits Climb, Despite Flat Windows Sales

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News Posted: Sat, Jul 23 2011 6:55 PM
Microsoft's own second quarter was a good one; the company reported total sales of nearly $70 billion ($69.94B). Operating and net income stood at $27.16B and $23.15B, up 13 percent and 23 percent over the same period in 2010. Interestingly enough, the company's major growth areas were in the combined Entertainment / Mobile division where strong Kinect uptake and a successful Windows Phone 7 launch pushed revenue to $1.49B, up 30 percent over 2010. The company is often portrayed as an Office + Windows behemoth whose other projects lose money. While it's true that those two areas generate the vast majority of company revenue, the 'Other' column isn't a unilateral loss.

The one area where Microsoft lost money, in fact, was Windows. The Windows/Windows Live division reported revenues of $4.74B, down one percent quarter-on-quarter and $19.02B for the year (down two percent). This is partly a result of accounting maneuvers--Microsoft pre-recognized revenue for Windows 7 prior to launching the product--had they not done so, estimated growth would've been in the 2-4 percent range. The company reports that businesses continue to convert to Windows 7, with business system sales up eight percent, partially offsetting a two percent decline in consumer sales.


Investors continue to be wary over whether or not Microsoft can effectively transition to tablets. "All eyes are on Windows and how they are ultimately going to extend this franchise in the future, as the PC business continues to lose share to the tablets," said Josh Olson , technology analyst at money manager Edward Jones. " Microsoft is really a show-me story in terms of its ability to extend its core flagship products to these new growth platforms."

The company also posted strong Office sales, though Office 365 is a work in progress and has yet to fulfill the promises Microsoft has made for it. The company believes its entertainment division will drive further gains in the next 12 months, thanks to the combination of strong Xbox sales and increased adoption of Windows Phone 7. The software giant's much-publicized deal with Nokia could add impetus to that last point, provided consumers respond to additional Nokia phones as positively as the company hopes.

Over the longer term, Microsoft's Windows profits will partly hinge on whether or not Windows 8 is able to address the concerns of that market. That said, current analyst concerns that Windows 7 revenue is being eaten by tablet sales are incorrect. For now, the tablet market simply isn't big enough to chew into total PC sales in significant numbers. This is particularly true considering that there are segments (think small business and enterprise) where the overwhelming majority of workers are going to be buying desktops and laptops, even if the company does deploy a small number of tablets.

If Windows 8 proves unable to meet the needs of this emerging market, Microsoft may have a genuine revenue problem to deal with. For now, it's a bit premature to borrow trouble.
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realneil replied on Sat, Jul 23 2011 11:33 PM

You know how there was a whole lot of people who didn't stop using XP because Vista was such a POS? It took forever to wean most of them from XP and there are still many hold-outs to this day.

Even if Win-8 is spectacular, I may just stick with my Win-7 because I like it just fine. Also, you can bet that Microsoft would never pull an "Apple" and only charge $29.00 for the upgrade. Be prepared to be bled dry if you choose to move to Win-8, people.

My Win-7 is bought and paid for, thank you.

(as they say,...if it works, don't fix it) Smile

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"I have two Machines, one with XP and one with Vista 64 bit. On the XP, I Have many important cracked software running, some of them dont work in Vista cause its 64 bit, and other just plain work great on XP , so much that I wont have to put Vista On It. 

realneil:
because Vista was such a POS?
"

"I dont like Vista that much , it was a  pain at first, Most annoying is windows picture and fax viewer recognizing videos and playing them if it happens to be in a folder that has pictures, hate that, because it always crashes. There are other things too, but I'm already use to it. When the Time comes for a new build, I will do a fresh Win 7 install, and I wont upgrade the Vista PC to 7 cause of fear of something going wrong during the transition, so I will transfer or re-install what I need"

-Optimus

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realneil replied on Sun, Jul 24 2011 3:41 PM

OptimusPrimeTime:
I dont like Vista that much, it was a pain at first,

Vista was almost unusable until the first service pack was released. File transfers seemed to be conducted at a snail's pace and everything was buggy. For me, using Vista was a real PITA. (for those of you who seem to LIKE Vista, try installing it without an internet connection and use it without the service pack for a while)

Maybe you'll remember when XP was still the latest release from Microsoft. They spent a bloody fortune on a massive advertising campaign advertising Vista and it's new and fantastic capabilities. There was a lot of buzz about it and it was made out to be the greatest thing since flat screen monitors.

I had been burned by them before by buying one copy of Windows Millennium (Win-Me), but I honestly thought that they had learned from that and were vetting their software before they released it. XP was out, and it was OK,........and it was miles better than Windows Me was.

So Microsoft was creating quite a stir with their Vista Ad Campaigns and claiming all sorts of new improvements that would be a part of Vista. At the time, I had plenty of cash on hand, I was working my Aerospace Job, and building & repairing PC's on the side too. They offered a deal on Vista Professional and I pre-ordered four copies for myself. (one for each PC I owned) This cost me a lot of money. Money that I never got any value from either.

This is why I bought my iMac 24" screen. I was so pissed-off at Microsoft that I decided to go to Mac because of Vista. (the Mac was a great PC too)

If they hadn't have given away Windows-7 to the masses for free for that one year period, I never would have bought a Microsoft OS again.

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rapid1 replied on Mon, Jul 25 2011 12:19 AM

Hmm I have beta'd every version of Windows for Microsoft since 95 SE, and of course used Windows primarily since 3.0. Being a very long term beta tester I did not pay a dime for Vista as they sent me both a 32 bit and 64 Bit gold DVD after it was released. I have installed and worked with both, but I never liked Vista. The only computer I ever used it on primarily was on my laptop that 32bit pro came on, which I upgraded to 64 bit GOLD (this was developers edition above ultimate). I did not have it for very long though I think it was 3-4 months and the 7 beta started which I was on as soon as it was available, then 7 RC, then I grabbed a copy of 7 Pro with a student discount the day it was released. As far as XP on my desktop it was on my desktop and Sarah's she still has XP Pro on her's and still does not want me to change it to this day. To each his own I guess, I am looking forward to Win 8 Beta coming soon personally. Whenever I do have Windows 8 I will most likely talk Sarah into letting me move her to 7 Ultimate.

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Joel H replied on Sat, Jul 30 2011 5:57 PM

You know, one thing that came out of the Vista Capable lawsuit is that in the first 6-9 months of Vista's release, Nvidia drivers accounted for a staggering 22% of all logged crashes. The documents that were released included pages and pages of every file that caused an OS crash--NVCPL.dll (IIRC), was #2, behind a generic rundll32 error (again, if I recall correctly).

That's not to say Vista didn't have problems like the aforementioned network bugs, but Nvidia's terrible drivers really took a toll on the OS's popularity. Keep in mind, this was a list of crashes in 2D and 3D, not simply a gaming-centric list.

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AKwyn replied on Sat, Jul 30 2011 6:25 PM

I have to give my opinion and say that Vista was not the disaster it was, sure it had some bugs but using it for as long as I have; it barely crashed and I barely ran into very annoying problems like the one OPT mentioned; and I was one of the runs running it without a service pack, well into the beta versions... I do admit that it wasn't as revolutionary as everybody claimed but it's not a disaster. If anything it managed to introduce a very slick UI called Aero to everybody who used it, so Vista was not a total loss but it could of really been more to be honest.

Windows 7 was a step forward for Microsoft, and the right one at that. It was what Windows Vista should of been, all of the compatibility problems were nonexistent, alot of the bugs where squashed and there were alot of new features (the new Media Center for example, also don't forget about DirectX 11). Now I prefer Windows 7 to Vista but I still hold the feeling that it's not the disaster people make it out to be, and yes I did use it without a service pack for a long time.

 

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