Microsoft sees slide in profits

[Ynot]

http://news.bbc.co.uk/1/hi/business/7366106.stm Microsoft sees slide in profits Computer software giant Microsoft has seen third quarter profits fall, but beat market expectations. Profits fell 11% to $4.39bn (£2.22bn) in the three months to 31 March from $4.93bn a year earlier. Sales were stable at $14.5bn. Sales in the division selling Office and other business applications fell, hit by lower demand. The results come before a deadline the firm has given Yahoo to respond to its $44.6bn-bid for the internet firm. One factor denting profits was a $1.42bn fine imposed by the European Commission for breaching competition rules. While the firm predicted stronger sales for the year, its forecast for the current quarter was at the lower end of market expectations, contributing to a 5% fall in the firm's share price in after-hours trading. On the plus side, the firm's Xbox 360 video game consoles showed a strong performance, helping sales in its entertainment and devices sector grow 68% year-on-year. Online role The firm reiterated its commitment to expanding its online presence and its bid for Yahoo. "With respect to Yahoo we have been clear speed is of the essence," said chief finance officer Chris Liddell. Microsoft can either withdraw its offer or go directly to shareholders, effectively turning it into a hostile bid. "With or without a Yahoo combination, Microsoft is focused on the online advertising market," Mr Liddell said. Analysts have mixed feelings about the impact a tie-up with Yahoo might have. Andy Miedler, an analyst with Edward Jones said that while the Microsoft Yahoo deal made strategic sense, from a financial perspective, "we're cautious". "We already think they're paying a high price." A day earlier Yahoo reported better-than-expected results, seeing profits triple in the first three months of 2008. Yahoo's board of directors maintains that Microsoft's offer undervalues the firm. Microsoft's online services saw a 40% rise in sales to $843m in the quarter, but it still falls far behind Google.

[ninja9578]

Not surprising. Microsoft is starting to get profit for the Xbox? When did that happen, it had always been microsoft's plan to loose money on the Xbox by selling it cheaper and making the money up by skyrocketing game prices. No surpise that no one wants the new office or Vista. I still don't see a Microsoft run Yahoo! any time soon. A hostile takeover doesn't seem likely since I'm sure that the Yahoo! board of directors who are against the takeover still have majority control of the stocks. Your posts hurt kittens

[Ynot]

If MS isn't careful, their shareholders will push for them to split into multiple companies (exactly what happened to IBM in the mid eighties) Xbox still has an overall loss, but it started to pull in profits a few months ago, largely due to the success of Halo 3 however, the Office and the Xbox division are currently the most profitable These could be split off into independent companies if shareholders get spooky

[Ynot]

Ars has a nice write-up on this http://arstechnica.com/news.ars/post...ey-online.html The truth hurts: Microsoft just can't make money online Microsoft reported third-quarter results last night, and the numbers just weren't that great. By the numbers Sales showed infinitesimal improvement over last year, moving from $14.4 billion to $14.45 billion. $0.47 a share in adjusted net income was a happier story, compared with $0.38 a year ago. Management took great pains to remind us that the year-ago quarter was the launch period for consumer-level Vista versions, so the comparisons should be tough. With that in mind, the server software division showed some improvement while consumer software sales and profits slowed down a bit. The entertainment segment, while still very small in the grand scheme of things, boosted revenue by an impressive 68 percent year over year and actually turned a small ($89 million) operating profit. That's a rarity in this holiday-light reporting period. The online services department reported $843 million in sales, up from $603 million last year. $143 million of the difference came from the recently purchased aQuantive, so the organic growth was a more modest $97 million, or 16 percent. Unfortunately, higher sales did not translate into operating profits, as the segment racked up $228 million in losses this time, 33 percent worse than last year. Compare and contrast Yahoo's report on Tuesday night showed 9 percent revenue growth and essentially flat earnings of $0.11 per share, if you remove a one-time gain of $0.36 per share from investments in Chinese search engine Alibaba. That's way better than Microsoft's online efforts, but the two would-be partners combined made just $173 million this quarter, which compares rather badly to Google's $1.31 billion net profit. So how does all of this affect Microsoft's bid for Yahoo? Microsoft is still talking tough: "The strongest argument that I've heard on why we should increase our bid, simply that we can afford to, is not one that I favor," said CFO Chris Liddell. "We've yet to see tangible evidence that our bid substantially undervalues the company. In fact we see the opposite." The company still very much wants an agreement with Yahoo, but Liddell left the door wide open for a hostile takeover—or dropping the deal entirely. The bottom line Recent price action in the two stocks involved shows growing investor skepticism towards a quick deal. Microsoft's stock gained nearly 9 percent in value last week while Yahoo lost 4 percent. Given that the proposed deal is half in cash, half in Microsoft stock, that means that investors in Yahoo are willing to sell their shares at significantly less than the deal's value. The offer today stands at $30.62 per share, while Yahoo's stock sells for $27.30. That points to either a lower bid directly to shareholders, or to a Yahoo-less Redmond. I still think the latter choice would be best for everyone involved, except Google. Yahoo is doing fine on its own, but would become a shadow of its former self if forced into a union with Microsoft. Glue two broken parts together, and you just get a broken, sticky mess. As a Google shareholder, I should be rooting for a merger, but I'd much rather see healthy competition than an easy win. That's just better for everybody.

[Ynot]

Again.... http://news.bbc.co.uk/1/hi/business/8166262.stm Microsoft has reported disappointing results for the April to June quarter, with profits down by almost a third. Net profit for the period was $3.1bn (£1.9bn), down by 29% from the same period a year earlier. Revenue came in at $13.1bn, down 17% from a year ago. The results were worse than analysts had been expecting. The world's largest software maker said it had been affected by weakness in the global personal computer (PC) and server markets. Cost cutting In after hours trading, Microsoft shares fell more than 7%, reflecting the market's disappointment with the results. "It looked like a pretty tough quarter for Microsoft. The top line was very weak," said Toan Tran at Morningstar. The one bright spot was the company's cost-cutting measures. "In light of the environment, it was an excellent achievement to deliver over $750m of operational savings compared with the prior year quarter," said Chris Liddell, Microsoft's finance chief. Microsoft makes most of its profit selling the Windows operating system and business software such as Office. However, demand has been hit by falling sales of PCs as consumers and businesses trim spending. Microsoft - which became a public company in 1986 - has been looking at ways of cutting costs. In January, it said it would cut up to 5,000 jobs over the next 18 months, including 1,400 immediately. Increasing pressure To make matters worse, the company is coming under increasing pressure from internet search engine Google, which recently announced a better-than-expected rise in second quarter profits. Google is developing an operating system for personal computers in a direct challenge to market leader Microsoft and its Windows system. Microsoft itself is poised to launch its new operating system, Windows 7, this autumn. The news seems to have sparked a stock selling spree, as well http://www.bloggingstocks.com/2009/0...ranted-or-not/ Microsoft Corporation (NASDAQ: MSFT), a company in the same competitive league as Apple, Inc. (NASDAQ: AAPL), Google, INc. (NASDAQ: GOOG), Yahoo! (NASDAQ: YHOO), and International Business Machines Corp. (NYSE: IBM), posted its Q4 earnings release after the bell on Thursday. As I was writing this paragraph, shares of the software giant were trading down over 6% in the after-hours session. Looks like the market was disappointed. To be certain, the results weren't great (of course, no one was expecting them to recall the company's growth story of yesteryear, I'm confident about that, let me tell you). Sales were down 17%. Operating income on a dollar basis dropped 30%. And, on a reported basis, Microsoft's per-share profit, calculated out to be 34 cents, declined 26%. On an adjusted basis, adding back 4 cents for a few items, earnings came in at 38 cents per share. According to my earnings preview, that beat estimates by two pennies. Now, if you read through my earnings preview article, you'll note that I did an earnings trade with Microsoft this week. I was figuring that, with the excitement of the announcement coming up, with the recent price-action characteristics of the shares, and with the general bullish tone of the markets at large, I could make a quick dollar-gain trade. I bought shares for $24.32 a piece on Monday. Thankfully, Microsoft reached my desired price of $25.32 earlier on Thursday and I sold out before the earnings announcement. I knew betting on an after-hours rise was risky, but I still wanted to take the chance; again, it's great that my sell order was triggered and that I lucked out with a profit. But, is all lost with Microsoft? At the beginning of this piece, I said shares were down 6%. Guess what? They're now down 8% as I type! Wall Street really hates Microsoft at the moment! Please. If you've got a long-term horizon, don't worry. Microsoft generates a lot of cash. Sure, annual operational cash flow is down this year, but the business still brought in over $19 billion. If you add up the dividends paid out to shareholders and the cost of the repurchased stock, you still don't reach $19 billion. Think about that, my friends. Microsoft is in for some challenging times. But it has a few good brands -- Bing, Xbox 360, and a little thing known as Windows (also referred to as "operating-system monopoly" in layman's terms). When the recession is gone, Microsoft should prosper. So, if shares of the company pull back over the next several trading sessions (and they most likely do need to consolidate a bit; if my fellow investors don't believe me, I urge all to engage a study of the chart), I'd probably take a look at them; come on, management beat the analysts, correct? I'd have to believe that this isn't a lack-of-confidence vote so much as it is a profit-taking exercise. Maybe I'll turn out to be wrong, but I remain bullish on Microsoft's potential in the years to come.

[ninja9578]

Not surprising. Both Apple and Google make very good products, they QA everything extensively. Microsoft develops right up until they release something, which is why their initial releases are always so buggy. Buggy initial releases frustrate people and push them to Google Chrome, Mozilla Firefox, and OSX.

[Keresztanya]

Not surprising. Microsoft is starting to get profit for the Xbox? When did that happen, it had always been microsoft's plan to loose money on the Xbox by selling it cheaper and making the money up by skyrocketing game prices. They're not profiting for the console themselves, he article probably meant that they're profiting off of games. The only people actually making money from the console itself is Nintendo with the Wii.

[slayer]

Can someone put this in simple laymans terms?

[ClouD]

^ >> Microsoft sees slide in profits

[ninja9578]

Can someone put this in simple laymans terms? People are shying away from Microsoft products in favour of Google and Apple products. Windows 7 has to be a big hit, or Microsoft will pull an IBM and shrivel up.

[slayer]

Why did they have to stray so far away from the XP?

[ninja9578]

Because XP is stable, but horribly out of date compared to other operating systems that Microsoft started to see as competition.

[Jeff777]

Microsoft should just go under already. Give me something newsworthy to watch on CNN for a change.

[Ynot]

the company should be split up, just like IBM and AT&T were in the eighties (it should have been split up in 1998 when the US government took them to court - but anyhow) 4 separate, independent companies 1 for the OS 1 for the desktop apps (MS Office, etc.) 1 for gaming (Xbox, etc.) 1 for online search & associated bits 'n bobs This is infinitely better (both from a business perspective, and for consumers) than a single multi-faceted mega-corp Separate companies with a single focus, rather than 1 large company who uses it's clout in one area to affect economics in another area MS are being hit with one anti-competitive case after another why has no-one stepped in and broken them up

[ninja9578]

Splitting up companies tends to make them terrible. In the 80s IBM and AT&T put out some of the most incredible advances in computers, IBM still puts out some advances, but I haven't heard anything out of AT&T since C++.

[Ynot]

The thing with breaking up a company, is they all split off and change their names So you may very well not hear anything about a former conglomerate, because they're now lots of small companies with different names Some live on as independent entities, some get acquired by other companies But all in all, better all round When IBM was split up - Lenovo bought IBM's PC division - IBM's multimedia division changed it's name to Fairway Technologies - IBM's networking division changed it's name to Advantis etc. etc. (see here for full list) IBM was the big, evil company that MS aspires to mimic However after the split, IBM's server division (the only division to kept the IBM name) are now the darlings of the open source world *edit* remember the personal computer market only picked up momentum after IBM's split before they sat at the top and dictated everything after, the market was full of IBM clones, prices fell like a stone, and normal people could afford a computer Who here owned an IBM machine? - thought not Who here owned an IBM compatible machine? - hell yes

[ninja9578]

IBM makes pretty good PCs. And the PC market exploded in the mid 1980's fueled by the Apple v IBM competition. Microsoft does have more and more competition. They try and muscle it out, yes, but there's a lot more of it now. They barely even compete in the gaming market, Nintendo dominates that market, they barely compete in the mobile and music market, Apple dominates that one. They dominate OS and Office markets, Office they still have a pretty good hold on. The only alternative that is at the same level is iWork and it's only available on Mac. The OS market they are starting to slip. Apple's been growing exponentially, and Linux is picking up some ground too. I think they're going to tear apart by themselves. Microsoft never really had great products, but they really started spiraling downhill when Steve Balmer took over. It's hard to believe that one man can change the direction of a company that size, but it seems to be happening.

[Exhalent]

I think one of MS' biggest problems is they try to do too much. They seem to go for quantity most of the time over quality.

[ninja9578]

How's this for the state of Microsoft Windows. Last quarter, Apple had 91% revenue share of high end computers ($1000+) Microsoft Windows PCs had 8%. Their share last year at this time was only 66%

[Ynot]

How's this for the state of Microsoft Windows. Last quarter, Apple had 91% marketshare of high end computers ($1000+) Microsoft Windows PCs had 8%. To be fair, that statistic is a little misleading 91% of the revenue for > $1000 machines went to Apple This statistic is totted out every now & then, and it's always mis-represented This is not unit volume

[ninja9578]

That's why I changed my post... how long did it take you to type that sentence? I edited my post at 5:23, your post didn't go out until 5:31, you had that quote open for 8 minutes?

[Ynot]

That's why I changed my post... how long did it take you to type that sentence? I edited my post at 5:23, your post didn't go out until 5:31, you had that quote open for 8 minutes? I'm doing about 4 things at once

[ninja9578]

Makes sense

[Xei]

It's impressive they've lasted this long really... I mean, name any other company which sells inferior products for higher prices whilst competitors give out superior products for free. :l

[ninja9578]

That's a fundamental flaw with unrestrained capitalism, not Microsoft. Massive advertising budgets allow them to sell piss-poor products at extremely inflated prices. It takes a while for people to figure out that they have better options.