A Bad Quarter for Microsoft. But Not Necessarily a Sea Change.

By  |  Thursday, April 23, 2009 at 6:09 pm

Today, Microsoft’s released its third quarter financial reports, and for the first time, saw a decline in its year-to-year quarterly results.

The company reported that its quarterly revenues were $13.65 billion, approximately 6 percent lower than they were this time last year. That missed Thomson Reuters’ sales forecast of $14.09 billion. Its net income was $2.98 billion, earning shareholders 33 cents per share.

In its filings, Microsoft noted that its earnings per share would have amounted to 39 cents if it were not for one time charges for employee severance costs and investment impairments. That figure would have met analysts’ estimates, according to reports.

I would be hesitant to say that Microsoft’s slumping performance is indicative of any type of sea change happening in the industry. Yes, by the company’s own omission, Windows client license revenues are down, but that does not mean that netbooks loaded with Linux are going to permanently displace Windows.

It is simply too soon to begin speaking about any long term trends taking hold, and there are too many variables. Despite its lowered earnings and occasional missteps, Microsoft remains in a competitive position in a number of product categories–without having ever accrued any long term debt. It is a strong company that is making operational and structural changes to adapt to the economic environment.

PC sales will spike this fall when Microsoft releases Windows 7 in October (unless it turns out to be January). I’m prepared to be underwhelmed due to fallout from the worldwide economic downturn, but when things begin to turn around, many people are going to want to buy new PCs loaded with Windows 7 and Office 14.



2 Comments For This Post

  1. Drew Says:

    I think you are right; I don’t know if we can read too much into these numbers. I’d like to see a year (or at least two more quarters) of data before talking about long term impact.

    I too wonder how Windows 7/Office 14 will go over, and how PC sales will be this winter. Another big question mark is what will happen with Android, and if it will make it’s way on netbooks.

    It will be an interesting year all around.

  2. tom b Says:

    “I too wonder how Windows 7/Office 14 will go over, and how PC sales will be this winter. ”

    Vista got some pretty glowing reviews before it was released; MSFT has people pumping Win 7 now. It still isn’t UNIX; it won’t be very secure or stable, or high-performance. Nor will it have a 21st century development environment. But maybe they convince some redhead in dorky glasses to run into a store and buy a copy when it hits the shelves.

    Having said that, MSFT will continue to make money for some time, just as Sun and SGI– far superior companies– kept going a long time.

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