Microsoft posts its best fiscal first quarter in years and Wall Street cheers. But the angst goes on.
- Derrick Shields at SeekingAlpha asks how can Microsoft stay competitive. The common refrain: The days of Office and Vista are numbered. We've heard this before--repeatedly for a decade. Wake me up when these units combined only make about say about $2 billion combined. In the first quarter (Techmeme) the client division (Vista, XP) and business division (Office) had combined operating earnings of $6.05 billion.
- Ben Worthen at the WSJ.com's Business Technology blog notes that corporate IT departments are funding Microsoft's Google chase. The argument: Microsoft's enterprise sales are driving the software giant's quest to become an advertising juggernaut. You don't say. Call me crazy but didn't Office and Windows fund a bunch of new ventures like SQL, Silverlight, Sharepoint and Xbox? If you have a cash cow you milk it to find new growth.
- Matt Asay at CNET's Open Road blog wonders why open source hasn't put a dent into Microsoft. Matt asks: Who wins in the stand-off between open source and proprietary software? And when? My answers: No one wins the stand off since it's not a zero sum game. As for the when: Much longer than anyone can imagine.
Simply put, a lot of folks spend so much time bitching about Vista and Office that they overlook one key point: Folks are buying this stuff.
On Microsoft's earnings conference call CFO Christopher Liddell said:
Clearly we are very happy with the client division overall. As you’ve seen since we launched Vista, the revenue growth has been in excess of 20% three quarters in a row, so the overall [headline] number, very good.
In terms of the premium mix, also very happy about that. Now, in this case, premium mix brings in both Vista and XP premium sales as well, and that’s tracking in the mid-70s, so 75% for the quarter, and that compares to I believe 59% in the equivalent quarter last year, so up 16 points year over year. So we’re very happy with the adoption of Vista Premium and also happy with the old XP Media sales as well.
The other thing I’ll point to is on the client annuity agreements, which is probably the best leading indicator we can think of of people’s intention to adopt, that’s still very early in the adoption cycle for businesses, but the volume licensing portion of our business was up 27% in the client area, so that’s a very good leading indicator from our point of view.
And sort of finally, as a wrapper, year-to-date sales are now 85 million units for Vista. That compares to about 45 million for XP over the same period, so almost twice as much.
It was a similar song and dance for Office.
At some juncture Windows and Office will naturally reach the end of their dominance, but don't hold your breath. And by time Windows and Office lose their mojo they will have funded a bunch of new businesses that may surprisingly pick up the slack.