Tag Archives: xbox

Microsoft cash cows alive and well, lame ducks still lame

Here is my quick summary of Microsoft’s just-announced quarterly results:

Quarter ending June 30th 2010 vs quarter ending June 30th 2009, $millions

Segment Revenue Change Profit Change
Client (Windows + Live) 4548 +1379 3063 +1134
Server and Tools inc. Azure 4012 +84 1546 +340
Online 565 +64 -696 -111
Business (Office) 5250 +683 3284 +578
Entertainment and devices 1600 +343 -172 -31

What’s notable about these figures? Well, the big-picture Microsoft question is how it is coping with industry transitions, in particular the transition from on-premise servers and desktop software to cloud services and mobile device clients. Of course you can debate the extent and speed of that transition, but I believe it to be real.

The story here is that Microsoft’s traditional products are still amazingly profitable, and that the effort invested in making Windows 7 a decent upgrade from Windows XP or Vista is paying off. Further, Microsoft Office sales actually exceed Windows sales. It does not really surprise me; despite the existence of capable cheaper or free alternatives, I rarely see business PCs that do not have Office installed; and Microsoft is busy locking in Enterprise customers with hooks between Office client and SharePoint server.

On the other hand, Microsoft’s progress in cloud and device looks amazingly bad. The figures are not all that easy to read, since Azure, Microsoft’s cloud platform, is part of the Server and Tools business; and BPOS, the cloud-based Exchange and SharePoint offering, probably sits there too. The “Online” business in the figures covers Bing and MSN, and earns its money primarily from advertising. This part of the business managed to turn in a loss greater than its revenue, which is remarkable considering how successful Google is with that same business model.

Entertainment and Devices is also hard to read. If you read the press release, it turns out that the reason revenue increased was not thanks to the success of Xbox or an unlikely rebound for Zune or Windows Mobile. Xbox actually declined, and so did Windows mobile, and the increase was thanks to increased sales of Windows Embedded:

Non-gaming revenue increased $35 million or 1% primarily reflecting increased sales of Windows Embedded device platforms, offset in part by decreased Zune and Windows Mobile revenue.

Windows Embedded is an interesting story. I don’t know how its figures break down, but I research things such as digital signage and point of service systems from time to time, and there is a lot happening in that space which deserves more attention from the technical press, especially as it directly touches our lives.

Despite the Embedded success, Entertainment and devices also turned in a substantial loss, though nothing like the horrors of Online.

Conclusions? One is not to write off Microsoft; it’s still a highly profitable giant. But the other is that the company desperately needs a big success outside Windows and Office to convince us that it really has a bright future. A sparkling launch for Windows Phone 7 would do nicely.

Keeping track of Microsoft financials

I’m in the habit of drawing up a simple table to summarise Microsoft’s quarterly results.

Quarter ending March 31st 2010 vs quarter ending March 31st 2009, $millions

Segment Revenue Change Profit Change
Client (Windows + Live) 4415 +967 3061 +788
Server and Tools 3575 +84 1255 +31
Online 581 +59 -713 -302
Business (Office) 4243 -265 2622 -134
Entertainment and devices 1665 +36 165 +206

Windows 7 booming, Office a bit slow prior to the release of the 2010 version, Online still draining money. Xbox doing OK. In other words, nothing much of interest.

Microsoft’s super-exciting Sky TV on Xbox with social interaction

I’m watching Microsoft’s Steve Ballmer present a session on cloud computing. It’s been underwhelming so far, but I was interested to see how Sky TV will look on Xbox 360 (though I’d readily swap it for BBC iPlayer, which Microsoft seems to be obstructing). The key point: you can watch with your Xbox Live friends and interact during the broadcast.

The broadcast was coming all the way from the UK to west coast USA, which was apparently why the avatars spent some time watching a buffering thermometer. Still, it worked eventually.

image

More on Ballmer’s cloud perspective later.