Microsoft's Q1 mixed ahead of Windows 8 launch

Microsoft's Q1 mixed ahead of Windows 8 launch

Summary: Microsoft's quarter was a mixed bag---and convoluted by the deferral of revenue related to upgrade deals. All eyes are on the Windows 8 launch.

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Microsoft presented a mixed financial picture for its fiscal first quarter, which landed just before the launch of Windows 8 next week.

The company reported first quarter earnings of $4.47 billion, or 53 cents a share, on revenue of $16.01 billion, down 8 percent from a year ago. Non-GAAP first quarter earnings were 65 cents a share. Wall Street was looking for first quarter earnings of 56 cents a share on revenue of $16.42 billion.

Microsoft's first quarter included the deferral of $1.36 billion in revenue and 13 cents a share in earnings related to its Windows and Office upgrade deals and pre-sales of Windows 8.

CEO Steve Ballmer billed the Windows 8 launch as "the beginning of a new era."

Here's a look at Microsoft's assumptions for the quarters ahead.

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As expected, Microsoft's enterprise business fared well. Microsoft's servers and tools unit showed an 8 percent revenue gain in the first quarter relative to a year ago. System Center revenue surged 20 percent.

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The business division, which is led by Office, brought in $5.5 billion in first quarter revenue, down 2 percent from a year ago.

However, the Windows and Windows Live division saw first quarter sales tank 33 percent. Much of that decline was related to deferred upgrade revenue. Excluding upgrade offers, Windows revenue would have declined 9 percent.

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As far as profitability goes, Microsoft's Office unit remains the cash cow with $3.65 billion in operating income. Servers and tools was No. 2 with operating income of $1.75 billion. Windows had operating income of $1.65 billion. 

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It's also worth noting that Microsoft's online services unit pared its losses. The unit lost $364 million in the first quarter compared to a loss of $514 million a year ago. 

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Topics: Enterprise Software, Microsoft, Windows

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  • Dude

    You are sure you don't need help?
    davidtayo
  • Anyone buying Windows 7 to upgrade their Vista systems?

    As soon as you announce an upgrade, people wait for it and stop buying the current version. I wonder how many people are going to hold out for the Surface Pro, cannibalizing RT sales. I am on that list.
    rp518
  • Microsoft's Q1 mixed ahead of Windows 8 launch

    Doesn't sound so mixed when they are posting profits. With the release of Microsoft Windows 8 and associated devices next week its going to be a very good quarter for them. As of right now everyone I know is waiting to do any upgrades until Microsoft Windows 8 is released then there is going to be a boom in sales. I'm on tap to buy a couple licenses already and I've convinced some others to do the same for when they change out their hardware. Keep up the good work Microsoft!
    Loverock Davidson-
    • "everyone I know"

      You and your imaginary friend(s)?
      D.T.Long
    • I'm with ya buddy.

      Looking forward to Oct 26th!
      ackacka
  • Mixed bag?

    Revenues for their two monopoly earners down 33% YoY for Windows, 2% for Office. Server & tools up 7% - but consolidated income a whopping 26% YoY!

    Income in newer divisions (online & entertainment) still haven't recovered prior losses.

    These figures are a disaster!
    Richard Flude
    • Fix: consolidated income DOWN a whopping 26% YoY or USD1.9b for the qtr!

      These figures are frightening, add the reservations about their Win8 strategy and investors should be concerned. We'll know in January.
      Richard Flude
      • I agree with you:

        The number of anti-Microsoft people on this site that appear genuinely upset of Windows 8 is quite surprising.

        And for reference, nothing frightening about those numbers, as Microsoft is far from going bankrupt, and they actually appear to be making money in this climate.
        John Zern
  • Steve Ballmer is right about Win8 being "the beginning of a new era."

    In the same sense that a roller coaster at it's highest point is at "the beginning of a new era." Buckle up, Mr. Ballmer!
    Userama
  • I have a question for SeanConnery, Richard Flude, and Userama

    Do you guys hate Microsoft?

    There is no right or wrong answer, I'm just curious how you would describe your feelings towards MSFT.

    I'm running a little experiment and your help would be greatly appreciated.

    Thanks.
    toddbottom3
    • No, I don't hate Microsoft.

      Bill Gates (or more likely his father) made some very good business decisions back in the early days of PCs. As a result, Microsoft has been King of the Hill in the enterprise, and by osmosis, the consumer market, ever since. They did throw their weight around some and got into hot water with the feds, and that didn't set well with many folks, me included.
      I see Microsoft today as a company that, despite spending big bucks on R&D, is short on exciting new products. Business-wise, they're still doing well--pretty much on inertia. But they're not dumb. They've figured out that the Windows cow is giving less milk, and they have to do something about that. This dramatic new turn they're taking with the services/hardware approach strikes me as an extremely risky, almost desperation move, but one they had to take to get into the mobile game. I think that changing too much too fast is going to get them in trouble. Based on many of the comments I've read from die-hard Softies about Win 8, I'd guess that it is not going to be a barn burner. I think Microsoft is in for a rough ride in the near future.
      So no, I don't hate them at all. I do, however, find Microsoft fanatics as irritating as you find Apple fanatics. But that has nothing to do with the company.
      Userama
      • Thanks Userama, much appreciated

        I truly can't disagree with a single thing you wrote, especially:
        "This dramatic new turn they're taking with the services/hardware approach strikes me as an extremely risky, almost desperation move, but one they had to take to get into the mobile game."

        I see similarities between Nokia and MS. Nokia realized that they had to take drastic, deperate, risky moves to stay alive and they've done that. I think MS is doing the same thing. The worst thing MS could have done is nothing, you and I seem to agree on that.

        "I do, however, find Microsoft fanatics as irritating as you find Apple fanatics. But that has nothing to do with the company."

        And on this we agree 100%. I wouldn't have purchased my iPhone or iPad if I hated the company. It is sad when people have to resort to lies and FUD in order to dissuade people from buying products that excite them, no matter which "team" that commentor is "cheering" for.

        Thanks Userama, I really appreciate your response.
        toddbottom3
        • Nokia and Microsoft

          No todd, there is absolutely no similarity between Nokia and Microsoft.

          Nokia was tricked (by Microsoft) into this trap. They will not escape. Unfortunately.

          Nokia was not having the problem Microsoft has. It had good projects, but was at a crossroad as to how to improve it's smartphone offering. Any way Nokia could have taken, would have been profitable. Nokia has unrivalled expertise in mobile *phones*. That is, any way but Windows Phone.

          I am still dismayed as your insistence that these are "teams". So you belong to some team and argue with me and others based on this premise? Wow! Silly!
          danbi
          • Who belongs to a team?

            Me, who owns a Windows 7 laptop, an Xbox, an iPad, an iPhone, and soon a Surface RT and at 1 point in time used gentoo (a long long time ago)?

            Or you who proudly states that they have never, and will never, own a single Microsoft product.

            Yeah, one of us is on a team. I'll let you figure it out.
            toddbottom3
          • Excited much?

            Toddy, I only buy Apple things in the past two years. Been in this industry for almost 30 years. Want to know why? Let me explain :)

            Ordinarily, I would assemble my own kit. But frankly, found out that is taking much of my time. I know, I am getting old :) Apple on the other hand produces very well designed things. Not only are they very well designed and joy to use, but also very well supported. Apple, in addition never promises things they would not do. Thus, my time fiddling with the things is spared. I can concentrate on *using* it.
            This is what one does with a product they purchase, right?

            In contrast, all things Microsoft I have been using during the years (*) and yes, I have been using *way more* Microsoft things than I am using Apple things (or likely to be using Apple things in future) -- have always behaved line a Tamagotchi.

            Do you know what an Tamagotchi is? Ok, I won't ruin it -- look it up for yourself. I might offer more explanation later.

            (*) While I have experimented and evaluated with a lot of Microsoft technology and concepts, I have never ever put any of my businesses to depend on it. I run *everything* on UNIX. At least for the past 25 years. I find any of the technology Microsoft offers way inferior and unreliable for my purposes.
            Like I mentioned few times already, the only things that run Windows is the systems that are purposely designed to run only in Windows, such as AutoCAD and there, trust me, Windows is used only to load the application.

            Make no mistake. I am capable to design and assemble myself an OS tailored to my specific needs. I know Microsoft's technology and products are not for those like me. Yet, Microsoft keeps trying to hook me in ... pathetic!
            danbi
          • I know Linux isn't UNIX but I've had opposite experience

            I tried Linux. I went all in with gentoo and wow, this quote from your post really jumped out at me:
            "Thus, my time fiddling with the things is spared. I can concentrate on *using* it."

            because that is the exact opposite of my experience with Linux. I spent hours and hours figuring out compile flags and trying to update it daily which required further hours of compilation. Windows, for me, was the complete opposite. It just worked. It just never broke. Isn't it interesting how you can hate Windows because it never worked for you and yet I can have the exact opposite experience where Windows simply always worked perfectly. I guess this is why I have trouble understanding why people hold up Apple's "perfectness" as being something I should leave Microsoft to get. I already get that with Microsoft. I have to reboot my iPhone more often than I have to reboot my Windows 7 laptop (to be fair, I don't reboot either very often).

            As for MS trying to hook you in, not totally sure what you mean by that. You mean they continually advertise things to you? Yeah, for profit companies do that. Heck, even not for profit companies do that. Have you seen how many people on ZDNet keep demanding that we all switch to UNIX? Oh, yeah, you probably know what I'm talking about.

            Anyway, I'm glad you enjoy your Apple products. I sincerely hope that Samsung is never successful in blocking you from purchasing an Apple product. So far, it is Apple that is blocking millions of people from buying Linux powered tablets and phones. What a shame. Apple is causing so much damage in the market.
            toddbottom3
          • To be frank

            I am no fan of Linux either.
            My initial experience with Linux was awful. Admittedly that was long long ago.
            Linux has since improved, to the point it is today very viable platform. Well developed and capable.

            But, I still do have problem with it's license. GPL is not exactly "free" software. The GPL license is incompatible with serious commercial use and development. That license is like a virus. The BSD, Apache, CDDL and similar licenses are the real "open source".

            For the typical Windows user however, GPL is a non-issue and Linux can always replace Windows. This is why Microsoft has had this jihad for years.

            Like I said toddy, I don't use Linux. My preference is with BSD UNIX. I view UNIX as a toolkit, not an cast in stone OS. With the UNIX toolkit, I can build any flavour of OS I need. Anything. I can build myself "Windows" out of UNIX and I can build myself "OS X" out of UNIX. Done that, for the fun. Many people think an "OS" is the trade name, such as "Windows" or "OS X". An OS is the API. Anyway...

            Let me help you understand again. I don't hate Windows.
            I simply find it less capable as a platform.
            Windows has worked for me, always. Anything works for me. I understand this might be difficult to accept, but.. your choice :)
            But I can't trust Windows, nor Microsoft. It requires way more effort and that of course costs me more.

            Microsoft is trying to hook me in, as in sending top sales reps to talk me into "at least try this wonderful new Microsoft junk". All the time. No surprise here. Having "me" as an Microsoft customer would be great win for them.
            But.. there is nothing they offer that I can make use of... sorry.

            By the way, I don't know who is telling you to switch to UNIX. In my opinion, it is not you who should switch. It is Microsoft who would be wise to switch (and ditch some of their "innovative" junk in the process). Nothing wrong to keep the good pieces of their kit and offer it to users like you. But "operating system" and "Microsoft"... should not be in the same sentence :)

            Then, I have another grief with Microsoft. Great software house? Good.
            Then why is not their Office product and a bunch of other reasonable software they have, available for UNIX? Or for platforms such as iOS?
            Why should I have to run the Windows "operating system" in order to use their application software?
            (please don't involve Apple here, for they don't make any of these claims)
            danbi
          • Re: To be frank...

            "I don't hate Windows. I simply find it less capable as a platform."

            Can you give specific details on how Windows is a less capable platform?

            "Then, I have another grief with Microsoft. Great software house? Good.
            Then why is not their Office product and a bunch of other reasonable software they have, available for UNIX? Or for platforms such as iOS?
            Why should I have to run the Windows "operating system" in order to use their application software?"

            I think it applies to Apple too. Can I run iLife, iWorks (let's keep iWorks out of this list, since it hasn't been a major update since '09), Facetime, Logic Pro, Final Cut Pro or Aperture on Windows? Like you asked, why should I have to run the OS X "operating system" in order to use their application software?
            dvm
          • Windows is intitally easier but...

            When you start to manage servers and databases or program, Linux/UNIX makes more sense. Also if you want to learn about the windows registry, it is no easier than 'nix. You also get closer to the bones in Linux so items in the OSI reference model are easier to corrolate.

            I think the "they ripped off" argument is past it's prime. Who cares? Let's just blame it on Bush and start worring about the best ways to move forward. If you use the stand by car analogy, we are only looking at Model T's right now.
            maszsam@...
          • And yet you Toddbottom, whom have stated in the past, that you

            Would keep telling everybody in these forums to not buy apple products, so that the company would go out of business, can now try and convince everyone here that you don't hate or dislike apple?

            Wow!
            T-Wrench