|
All signs were pointing to a definite turnaround for the technology industry earlier this week, as the sector’s leading companies pulled out a steady stream of better-than-expected results. Then Microsoft came along and took a big dump right in the middle of the parade.
The software giant reported a 29% drop in quarterly profit Thursday for its fiscal fourth quarter, as it saw a drop in sales across all of its business units. Revenue declined 17% in the quarter, contributing to year which saw an overall decline in revenue of 3%. It marked the first time the company’s sales have declined on an annual basis since Microsoft went public more than two decades ago.
Let’s look at the damage. Revenues from Windows – down 29% from the year ago quarter; entertainment division – down 25%; MS Office – down 13%; online division – down 13%; servers and tools – down 6%.
It was simply a lousy quarter, no matter where you looked. Windows, was of course, the most disappointing segment, given that the division accounts for more than half of Microsoft’s operating profit.
In a conference call following the release of the results, Microsoft Chief Financial Officer Chris Liddell acknowledged that the quarter was a bummer, but said steps the company has taken to reduce costs should put it in a good position as it heads into its next fiscal year.
“In my mind, we are a stronger company than we were a year ago,” he said. “However, the economy continues to be challenging and we need to lift our game to another level in 2010.”
The results demonstrate why the company’s October release of its next major operating system release, Windows 7, is so critical. It simply cannot afford to come out with another disappointment like Windows Vista with the economy looking so fragile. All indications point to there being a strong pent up demand for new PCs, but the real question is whether corporations will decide to adopt the new operating system now, or hang on to their existing installations even longer.
Liddell as much as acknowledge that dilemma, saying the release of Windows 7 as well as the release of a new version of its Office suite in the first half of 2010, will certainly help sales, but said the economy will have an over-riding impact.
Only registered users can write comments.
Please login or register. |
