Microsoft's Windows revenues disappoint with 2% decline in fiscal 2011
The Redmond, Wash., Windows maker drew a muted response to the revelation of 8 percent year over year growth and net profit of $5.87 billion during its fourth quarter of fiscal 2011. For the full fiscal year, which ended on June 30, the company reported $69.94 billion in revenue, up 12 percent from 2010.
"Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion,â said Peter Klein, chief financial officer for the company. âOur platform and cloud investments position us for long-term growth.â
Analysts, however, were skeptical over the long-term likelihood of Microsoft's growth, honing in on the fact that its Windows business declined 1 percent in the fourth quarter and 2 percent for the fiscal year. However, the company asserted that, excluding the impact of last year's Windows 7 launch and revenue deferral, Windows growth was in line with the overall PC market growth of 2 percent to 4 percent.
Despite a 16.25 percent increase in sales, Microsoft's online services unit, which has bled almost $6.5 billion dollars over the past three years, posted a loss of $728 million, compared to a loss of $688 million a year ago.
"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," Reuters reported Edward Jones analyst Josh Olson as saying. "Microsoft is really a show-me story in terms of its ability to extend its core flagship products to these new growth platforms."
"These numbers are good. The question is, what will make Microsoft break this range in which it is stuck, between $25 and $28?" said Trip Chowdhry, managing director at Global Equities Research. "I don't see these numbers giving an indication that the stock is going to break away."
Shares of Microsoft remained flat in after-hours trading. Since the beginning of the year, the stock is down 2.71 percent.
Even as Apple's iPad has eaten into PC sales, Microsoft is betting that the next version of Windows will reverse the trend. Instead of opting to design an operating system specifically for tablets, the company has said it "views a tablet as a PC" and plans to bring Windows "everywhere on every device without compromise."
The company's results comes as a stark contrast to Apple's blowout performance in the June quarter. The Cupertino, Calif., company posted $28.57 billion in revenue and a 125 percent leap in profits to $7.31 billion, nearly 25 percent more than its rival's profits. It was just last quarter that Apple beat Microsoft's profits for the first time in decades.
56 Comments
I'd bet that 2% Windows revenue decline still meant an increase in Windows net profit seeing how much of the R&D is already accounted for. Still, I think it's not something we've seen before with MS and may be the start of a long and unfruitful trend.
Seems like they have run out of deferred licenses to forward post.
Cant wait to see how creative their bean counters will be for the next quarter.
If I was the CEO of Microsoft, I'd realize that success with the iPad did not come from trying to cram OS X onto it. They used iOS, and that's why Microsoft needs to put their Windows Mobile 7 OS on tablets. I think the Metro GUI is a great for post PC devices. Having said that, I drank too much Apple Kool-aid and I'm staying with iOS devices. Android, Palm, Blackberry, and Microsoft anything can kiss my ass.
I'd bet that 2% Windows revenue decline still meant an increase in Windows net profit seeing how much of the R&D is already accounted for. Still, I think it's not something we've seen before with MS and may be the start of a long and unfruitful trend.
I imagine the > $1 Billion in Patent licensing taxes are giving Microsoft a sigh of relief. Without them even more analysts would downgrade them.
If I was the CEO of Microsoft, I'd realize that success with the iPad did not come from trying to cram OS X onto it. They used iOS, and that's why Microsoft needs to put their Windows Mobile 7 OS on tablets. I think the Metro GUI is a great for post PC devices. Having said that, I drank too much Apple Kool-aid and I'm staying with iOS devices. Android, Palm, Blackberry, and Microsoft anything can kiss my ass.
And more importantly, it's 5 years of R&D upon which Microsoft will have to catch up.