Microsoft stuns with profit miss, job cuts

[mkrishnan]

$0.02 x 18B shares = $360,000,000

Yes, but they still made a healthy profit. $360M USD is a large amount of money but as a fraction of their overall revenues or profits, it's not any kind of game killer for them.

The comparison of Win7 to Leopard or SL is important, don't get me wrong. But Windows XP stole a lot more of Vista's market share than Tiger and Leopard did combined. So Microsoft's first challenge is still to appeal to their existing customers. If they can do that, they'll be awash in profits and they have a couple of years to continue thinking about what to do about Apple before Apple tops out and exits their comfortable "niche" in the market for OSes

 

[Sesshi]

I hear they canned the entire Flight Sim team. I bet X-Plane are cracking open the champagne...

 

[IJ Reilly]

Yes, but they still made a healthy profit. $360M USD is a large amount of money but as a fraction of their overall revenues or profits, it's not any kind of game killer for them.

It's not a large amount of money for Microsoft. The name of the game is growth -- and that's something Microsoft is not demonstrating now. They are being weighed down by stagnation in the PC industry, Vista isn't compelling to consumers and apparently especially not to their business customers -- and they don't have a profit center other than software to pull up the slack. The story here is that Microsoft is showing weakness in their core business, which is spotlighting the fact that they haven't been able to develop other profitable businesses. For the first time in their history, Microsoft appears to be in a perilous place. We'll see if they figure out how to get out of it.

 

[mkrishnan]

For the first time in their history, Microsoft appears to be in a perilous place. We'll see if they figure out how to get out of it.

Yeah, as I said before, I think that handful of things -- whether Office 07/08 are spurring buying and growth, what is happening with XBox profitability, and what will happen with Win7 (if netbooks continue to grow as a market and MS can convince Win7 onto them, that will be a big win for them) -- really will determine what comes next for MS. It's going to get harder and harder for them to grow, though, unless they change something fundamental about the way they do business.

 

[IJ Reilly]

Yeah, as I said before, I think that handful of things -- whether Office 07/08 are spurring buying and growth, what is happening with XBox profitability, and what will happen with Win7 (if netbooks continue to grow as a market and MS can convince Win7 onto them, that will be a big win for them) -- really will determine what comes next for MS. It's going to get harder and harder for them to grow, though, unless they change something fundamental about the way they do business.

Xbox profitability is always going to be a hit-miss proposition, literally. They don't make money on hardware, so they need to release a steady stream of popular games. This is always going to be a roller-coaster. And it also needs to be said that game consoles are a niche business. Even at best no way is Microsoft going to recreate their core business profits with Xbox. Beyond that, it all looks pretty bleak for Microsoft. They've been flailing around for new sources for revenue for decades now, and Xbox is about as close to success as they have ever come.