I am in the habit of putting Microsoft’s results into a simple table. Here are the latest:
Quarter ending June 30th 2012 vs quarter ending June 30th 2011, $millions
|Client (Windows + Live)||4145||-598||2397||-511|
|Server and Tools||5092||+568||2095||+409|
|Entertainment and devices||1779||+292||-263||-276|
It is easy to spot the stars: Server and Office.
It is also easy to spot the weaklings, especially Online, which reported a breathtaking loss thanks to what the accounts call a “goodwill impairment charge”. This translates to an admission that the 2007 acquisition of aQuantive was a complete waste of money.
Mixed signals from Entertainment and devices, where revenue is up but a loss is reported. Since this segment munges together Xbox and Windows Phone, it seems plausible that the phone is the main culprit here. Microsoft identifies payments made to Nokia and the addition of Skype as factors.
Windows is down, in part because Microsoft’s upgrade offer for Windows 8 means some revenue is deferred, though one would imagine that worldwide reports of stagnant PC sales are a contributory factor as well.
If you add up the figures, and allow for overheads, it comes to a wafer-thin operating income of $192 million and a $0.06 loss per share.
What do the figures tell us? Two things: Microsoft still makes a ton of money, and that it is exceedingly bad at acquisitions. I am not sure how a company can mislay $6.2bn without heads rolling somewhere, but that is not my area of expertise.
Microsoft’s Server 2012 family has impressed me so my instinct is that we will see good figures continue there.
On the Office side, it is not all Word and Excel. “Exchange, SharePoint and Lync together grew double-digits,” Microsoft said in its earnings call, adding that Lync revenue is up 45%.
That said, how many server licences can you sell in the cloud era? How can Microsoft grow Azure without cannibalising its server sales?
It is tempting to state, like James Governor at Redmonk, that this is The End of Software: Microsoft Posts a Loss for the First Time ever. Microsoft’s figures have stubbornly refused to prove this though; and a quarter where revenue has risen though poisoned by an acquisition disaster is not the moment to call it.
Microsoft has survived the cloud. The bigger question now is whether it can also survive tablets eating into its Windows sales, not helped by Google pushing out Nexus 7 at casual purchase price – see my first take here.
All eyes then on the new Windows 8 and Office 2013.