Microsoft Exceeds Expectations Again

[Sporkman]

http://biz.yahoo.com/ap/080125/earns_microsoft.html?.v=8

Microsoft Exceeds Expectations Again

http://us.news2.yimg.com/us.yimg.com/p/fi/14/78/22.jpg

Friday January 25, 7:36 am ET
By Jessica Mintz, AP Technology Writer

Microsoft Beats Wall Street's Expectations in Second Quarter; Vista, Office, Xbox Games Do It

SEATTLE (AP) -- Microsoft Corp. forecast a rosy 2008 -- despite broader economic worries -- after it blew by Wall Street's expectations for a second consecutive quarter.

"We will be impacted just like everybody else," if the U.S. falls into a recession, Chief Financial Officer Chris Liddell said Thursday. "But overall, we feel very optimistic about our second half."

Company officials touted rising sales in each of Microsoft's business divisions, a slate of important upcoming business-software launches and the growing contribution from sales in non-U.S. markets.

Microsoft raised its outlook Thursday for the rest of its fiscal year, which ends in June, matching Wall Street's forecast and sending shares up in after-hours trading.

The software maker's quarterly earnings jumped 79 percent to $4.71 billion, or 50 cents per share, from $2.63 billion, or 26 cents per share in the second quarter a year earlier. Quarterly revenue climbed 31 percent to $16.37 billion from $12.5 billion.

The comparison isn't entirely fair -- last year, Microsoft deferred more than $1 billion in revenue due to delays in getting Windows Vista to consumers.

Wall Street had been looking for a profit of 46 cents per share on $15.95 billion in sales.

Better-than-expected worldwide PC shipments, tougher anti-piracy measures and growing numbers of businesses switching to long-term volume software licenses helped boost revenue for the two Microsoft divisions responsible for Windows and Office to a total of $9.14 billion, 50 percent more than a year ago.

The division responsible for the Xbox 360 video game system swung to a profit on rising sales of games and accessories, which deliver better margins than the console itself. Microsoft said the division is still on track to be profitable in fiscal 2008.

The weakest spot was Microsoft's online services business, which competes with Google Inc. to sell advertising on the Web. Sales rose 38 percent, but the division widened its loss in the quarter to $245 million, from $118 million a year ago, dragged down in part by its acquisition of online ad company aQuantive Inc.

"Think about the revenue several years out and the infrastructure we're building for that," Liddell advised financial analysts in a conference call.

In the back half of the fiscal year, Microsoft is set to release new versions of a number of key franchises, including Microsoft Server 2008 and the SQL Server 2008 database system. Liddell said he also expects PC shipments to remain strong, driving sales of Windows Vista and Office.

"It looks like a very nice report," said Sarah Friar, an analyst for Goldman Sachs, in an interview.

While economic jitters haven't hit tech companies yet, Friar warned that information technology executives are shaving their 2008 budgets and may buy less from Microsoft. The company makes more profit from its business licenses than on sales to consumers, she noted.

Microsoft nevertheless boosted its full-year outlook and now predicts a profit of $1.85 to $1.88 per share on sales of $59.9 to $60.5 billion. Earlier, the company forecast earnings of $1.78 to $1.81 per share on $58.8 billion to $59.7 billion in sales.

For the current quarter, which ends March 31, Microsoft said it expects to earn 43 to 45 cents per share on $14.3 to $14.6 billion in revenue.

Shares of Microsoft rose $1.50, or 4.5 percent, in extended trading after the results were released. They gained $1.32, or 4.1 percent, to close the regular session at $33.25.

[karellen]

yeap, it seems they have the lion's share in IT...

[HermanAB]

Hmm, the devaluation of the Dollar probably represents 50% of that.

[Sporkman]

Hmm, the devaluation of the Dollar probably represents 50% of that.

...but that would be offset by (a) the higher relative cost of their foreign staff, and (b) the high rate of overseas piracy.

[bonzodog]

hrm...this is not what the share advisors have to say. They say "sell, sell, sell".


Dueling Fools: Microsoft Bear
By Rick Aristotle Munarriz
January 23, 2008

Microsoft (Nasdaq: MSFT) is a loser, Chuck.

I don't mean this in a schoolboy taunt sort of way. I'm just telling you it's not a winner. Why else would it have spent billions in the past year acquiring companies to beef up its presence in virtualization, cloud computing, and Internet search? Is it because the company is losing ground in those booming niches to companies like VMware (NYSE: VMW), salesforce.com (NYSE: CRM), and Google (Nasdaq: GOOG), respectively?

Of course it is. You don't need to watch the "I'm a Mac, I'm a PC" commercials to see that Microsoft is taking a beating. You see it in the company's financials where its online unit, incredibly, is operating at a loss; overheating Xbox 360 consoles find the company taking a huge warranty hit for a system losing market share to the Wii; and the upgrade wave of its flagship operating system has been more of a ripple than a tsunami.

That last point is important. This was supposed to be Microsoft's final feast, the major last hurrah for its Windows Vista operating entry and its Office 2007 suite of applications before the inevitable embrace of cheaper open source operating systems and Web-based apps.

Delays didn't heighten anticipation. They only let the apathy simmer in a crock pot of interminable indifference. Despite the hubbub over Vista's features, revenue inched just 15% higher in fiscal 2007. The company is guiding investors to expect a 15% to 17% advance this fiscal year. Then that's all she wrote -- make that all she coded -- for Microsoft. Analysts expect the top line to inch just 10% higher next year.

In fact, even Microsoft will tell you that its fortunes peaked several months ago. After a blowout fiscal first quarter (that ends in September for Mr. Softy), the company's guidance implies a 12% to 14% top-line gain through the final nine months of the current fiscal year.

Forget the fact that it's Apple's (Nasdaq: AAPL) Leopard that is winning the critical praise. Forget the fact that companies like Google and Adobe (Nasdaq: ADBE) are jumping into the cloud computing realm where productivity software applications are served on the cheap in cyberspace.

All you really need to ask yourself is why you're invested in Microsoft in the first place. Is it because the company's dominance happens to be in the high-margin software space? That palatial estate is toast, my friend. Is it because Microsoft is such a brute that it can make up the distance in emerging growth areas the way it always has with its Web browsers and productivity suites -- by simply bundling them in new PCs? Man, that kind of thinking is as outdated as Y2K.

Microsoft isn't going away, but it will gradually lose its relevancy. Could be why Bill Gates is leaving this year, dedicating his time to giving away the money he made instead of sticking around, giving away the reputation he built.

Smart guy. Even he knows that if Microsoft isn't a winner, it becomes a loser by default.

Read Chuck Saletta's bull argument.

Bear Rebuttal
Microsoft's Viva Pinata finds animated party toys trying to beef up their "candiosity" appeal. I'm starting my rebuttal with an obscure Microsoft property because Chuck is cheating you when it comes to the candiosity of the software giant's cash pinata.

I have no argument with Chuck's case for the attractiveness of cash in a recessionary environment. I'm with you! Why isn't Microsoft on board?


Cash and Short-Term Investments

6/30/04 - $60.6 billion

6/30/05 - $37.8 billion

6/30/06 - $31.1 billion

6/30/07 - $21.1 billion

With cash levels creeping even lower so far in fiscal 2008, Microsoft's cash mattress has shed two-thirds of its green feathers since peaking four summers ago. Chunky dividends, aggressive share buybacks, and overpaying for acquisitions aren't all bad. However, lighting cigars with greenbacks won't make rival products like premium Macs and dirt cheap Linux-powered laptops any less attractive or Google any less threatening.

In short, cash alone isn't the answer. If so, a company like Napster (Nasdaq: NAPS) that is trading essentially at its balance sheet greenery would reign supreme. You need vision, accelerating growth, and entrepreneurial gumption to be tomorrow's darling. Sadly, like its greenbacks, those qualities are also bleeding away with every whack of the pinata stick.
http://www.fool.com/investing/value/2008/01/23/microsoft-bear-argument.aspx

[Vadi]

A quick look at Microsoft's year (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NASDAQ:MSFT))

And Apple's year (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NASDAQ:AAPL))

Now if you look at the Linux competition ...

Red Hat (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NYSE:RHT))

Novell (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NASDAQ:NOVL))

...

... yeah, you get the idea. Things aren't so chirpy.

[macogw]

A quick look at Microsoft's year (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NASDAQ:MSFT))

And Apple's year (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NASDAQ:AAPL))

Now if you look at the Linux competition ...

Red Hat (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NYSE:RHT))

Novell (click (http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1201294800000&chddm=98532&q=NASDAQ:NOVL))

...

... yeah, you get the idea. Things aren't so chirpy.
Marketshare statistics according to Hitslink from February 2007 to December 2007:

XP 84.33% - 76.91%
Vista 0.93% - 10.48%
Intel Macs 2.09% - 4.02%
PPC Macs 4.29 - 3.28%
Win2K 4.75% - 2.66%
Win98 1.50% - 0.70%
Linux 0.42% - 0.63%

Condensed version of above market-share statistics:
Microsoft OS: 91.51% - 90.75%: ↓0.76 (increased market share by -0.8%)
Apple OS: 6.38% - 7.30%: ↑0.92 (increased market share by +14.4%)
Linux OS: 0.42% - 0.63%: ↑0.21 (increased market share by +50.0%)


(I did not compile the data. Someone on Digg pointed out the first half to refute "Vista's not doing well based on only being on 30-something % of new computers sold its first year while XP did 69% its first year" and someone else did the math to get the second which shows Linux and OSX growing while Windows shrinks. Someone else pointed out that Hitwise is blocked by AdBlock Plus, and since Linux users are most likely to use Firefox + AdBlock Plus, Linux's numbers could be higher than that.)

[Vadi]

Stock statistics and "marketshare" statistics are completely different things though. For the latter, everybody has different numbers.

[fatality_uk]

Marketshare statistics according to Hitslink from February 2007 to December 2007:

XP 84.33% - 76.91%
Vista 0.93% - 10.48%
Intel Macs 2.09% - 4.02%
PPC Macs 4.29 - 3.28%
Win2K 4.75% - 2.66%
Win98 1.50% - 0.70%
Linux 0.42% - 0.63%

Condensed version of above market-share statistics:
Microsoft OS: 91.51% - 90.75%: ↓0.76 (increased market share by -0.8%)
Apple OS: 6.38% - 7.30%: ↑0.92 (increased market share by +14.4%)
Linux OS: 0.42% - 0.63%: ↑0.21 (increased market share by +50.0%)


(I did not compile the data. Someone on Digg pointed out the first half to refute "Vista's not doing well based on only being on 30-something % of new computers sold its first year while XP did 69% its first year" and someone else did the math to get the second which shows Linux and OSX growing while Windows shrinks. Someone else pointed out that Hitwise is blocked by AdBlock Plus, and since Linux users are most likely to use Firefox + AdBlock Plus, Linux's numbers could be higher than that.)

I still think that 0.63% is underrated. Wait till Linux officially hits 1.5-2% (hopefully within the next 18-24 months). Apple will quickly start looking over their shoulders and I wouldn't be surprised if they released OS 12 or what ever it is by then ;)

[macogw]

I still think that 0.63% is underrated. Wait till Linux officially hits 1.5-2% (hopefully within the next 18-24 months). Apple will quickly start looking over their shoulders and I wouldn't be surprised if they released OS 12 or what ever it is by then ;)

Oh, so do I. I've heard that as of a year or two ago it was 3% Linux and 4% OSX.

[Vadi]

That's the thing. Nobody has accurate numbers.

And a lot of people dualboot. How do you could them? Surely not as 2 people.

[fatality_uk]

That's the thing. Nobody has accurate numbers.

And a lot of people dualboot. How do you could them? Surely not as 2 people.

Sadly your right. The figures are fuzzy at best.

[bobbybobington]

As long as the total number of linux machines goes up, and we continue to improver, I could care less about market share.

[fatality_uk]

As long as the total number of linux machines goes up, and we continue to improver, I could care less about market share.

You should care about market share! If in 2 years Linux has a dekstop market share of say 5%, then companies will by default have to look ate making a Linux port. 15 Million consumers will be a big enough draw for them to add Linux compatible to the boxes ;)

[happysmileman]

You should care about market share!

He does care, that must be why he said "I could care less.", implying he cares at least a little, unless he's one of the many people who doesn't care about making any sense at all, and will completely contradict himself.

Sorry, I really despise that phrase

[Knyven]

Linux hold little marketshare because its free???:)

[fatality_uk]

Linux hold little marketshare because its free???:)

*closes flame visor and steps away from the thread quietly* :lolflag:

[rosegarden78]

You should care about market share! If in 2 years Linux has a dekstop market share of say 5%, then companies will by default have to look ate making a Linux port. 15 Million consumers will be a big enough draw for them to add Linux compatible to the boxes ;)
The Wacom tablet and HP printer said Universal compatibility but made no mention of Linux. The manuals omitted all reference as if Windows and Mac were the only OS in the whole wide world. This despite there being hp-setup programs and wacom drivers included with Ubuntu. If they acknowleged a third player on the box it would snowball curiosity and people would switch. How long will they continue to ignore Linux? EDIT: It was wierd the first day that HP and Wacom both had drivers yet no mention of them in their manuals. I never meant to besmirch HP and Wacom more like those other guys. :KS

[Vadi]

I don't think HP is ignoring Linux at all.

[Babbage]

"Microsoft Exceeds Expectations Again...." I enthusiastically clicked this thread thinking Microsoft had some great new software application, that computer users where raving about. I'm disappointed, but should've known better. Microsoft products don't usually exceed expectations.

[Presto123]

Linux hold little marketshare because its free???:)

Not every bit of it. You can pay for support, etc.

[Vadi]

You can pay for Linux too. See Linspire.

Edit: there's nothing prohibiting anyone from charging for linux, or ubuntu even.

[barbedsaber]

when was the last time microsoft exceeded expectations? :-k

[fatality_uk]

when was the last time microsoft exceeded expectations? :-k

Dude, did you never try Windows ME. People were expecting it to be bad, becuase it was a rush job, but then when it came out, it was SO MUCH worse than people had ever dreamed it could be. (Well you didn't say in a good way ;))