Where Has Microsoft's Growth Gone? 24 comments
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Microsoft (MSFT) shares tumbled to $17.30 today after the tech giant reported weaker than expected earnings. Microsoft earned 47 cents per share vs. the 49 cents per share expected by Wall Street. Earned revenue came in at 16.6 billion which missed estimates of 17.1 billion. Microsoft failed to deliver up to analysts' expectations. This begs the question, 'Where has the growth at Microsoft gone?'
This week’s earnings announcements demonstrate the issues that Microsoft is facing. Microsoft’s PC software sales numbers were down sharply for the quarter. Microsoft blamed the lackluster sales on PC market weakness.This conflicts with what is happening at Apple. Apple (AAPL) crushed its earnings expectations and experienced 9% growth in iMac sales. While Windows is still the most popular operating system, the failure of Windows Vista has only helped to bolster Apple. Microsoft seems as if it's becoming more like IBM (IBM) with increasing sales from its business divisions and decreasing sales from PC divisions. Apple is rapidly becoming the new Microsoft.
Over the past decade, Microsoft has seen its stock decline 54%. I have owned Microsoft stock for years and the stock trades like a savings bond. The stock has had very little capital appreciation and a low dividend yield. For years, I have waited while product after product is trumpeted as the next big earnings driver for Microsoft. From the Zune to Windows ME to Tablet PC’s, Microsoft has struggled to regain its technological edge. Meanwhile Apple has seen its stock increase 800% over the past decade. Apple has developed innovative products including the iPhone, iPod and iMac.
Microsoft may have to look to build upon its online search division and entertainment division for growth in the future. Microsoft’s search and advertising revenues were up slightly. If Microsoft does a deal with Yahoo (YHOO), the combined companies would have a stronger presence in the online search market. Also, Microsoft’s entertainment division had positive sales growth the past quarter. Video games have appeared to be recession resistant so far. The next generation XBOX’s hardware and software sales could contribute significantly to the bottom line.
Microsoft is still a cash cow and could reinvent themselves with a major acquisition or a new product launch. Hopefully, Windows 7 can be the catalyst to finally ignite earnings growth. Until the company identifies their next great software product, the stock will likely continue to flounder.
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And this is only the start. Apple will easily be at 20% userbase in a year or two. MSFT has nothing to compete with any of Apple's products, Mac, iPod, iPhone, nothing even close. A lot of people thought, for a long time that windows was 'good enough' and maybe it was back then, but Apple has gotten far better and MSFT has gotten worse, or at least only stayed rougly the same as it was 5-10 years ago. They never do anything new, they are afraid to kill off any of their cash cows and they cater to 'business' so much that they have no creativity. It doesn't help that MSFT's only 'creativity' in the past was in copying Apple's stuff, badly.
To anyone who is surprised by this, you must not have been paying attention.
Model is broken. In past, Microsoft forced upgrade on enterprises and that was a huge part of revenue stream. Nobody wants to upgrade to Vista. In past, Windows was the only option for retail customers, now there is Apple. And don't forget billions thrown onto the Web, more and more every quarter.
I was informed by a Vista beta tester for months before the launch that Vista was a total disaster and that I would experience severe returns and customer calls once it launch at the end of Jan. in 2007.
He was right on the mark. In fact, things were so bad that this big retail office firm had a conference call early in that quarter to bemoan the fact that they were losing tons of money on the failure of Vista to renew the buy cycle of new PC's. It probably was one factor that encouraged them to start cooking the books and fudging numbers on the rebate programs they had with manufacturers. Now they are being examined by the SEC....well....that's on paper of course...just like they were investigating Madoff.
Now with the collapse of the economy they are in deep-doo-doo.
Back to Microsoft. Time has caught up with them. With the advent of the internet, you don't really need a real giddy-up computer anymore. The front-office folks really do not need the latest version of Windows to play Solitaire and surf porn when the boss isn't looking. And the back-office and server guys have finally stabilized Server 2003....they sure as hell do not want to fark that up by installing Server 2008, based on Vista.
As far as the Xbox.....Microsoft LOSES money on the hardware, like Sony....but unlike Nintendo. Obviously they gain money back on the software, but hardware is a drain on profits.
Microsoft has been coasting for far too long on a platform they started with Windows NT4 in the mid-90's and they have for far too longed simply copied Apple when it came time to refresh their interface.
And now with word that Windows 7 (out in 2010) is really just Vista the way it should have been in 2007, it's just proof that Microsoft has really just run out of ideas.
Which means stagnation and in this economic environment that's not a good or compelling reason for a person to buy.
MSFT has never been an innovator and has always relied on two key products: Windows and Office. Windows has been patched so many times it's all band-aids.
Steve Jobs oversaw the complete re-write of Mac OS when he was at NeXT-- not knowing he'd be coming back to Apple. I don't think MSFT has too many of its nine lives left; they CAN'T do a full rewrite of Windows at this late date. They say even Asus-type netbooks are moving increasing to LINUX, so MSFT is really being hit on multiple fronts. Apple doesn't NEED netbooks; the iPhone and iPod Touch will fill that segment for many individuals. And they make the hardware, the OS, AND get a cut on all the apps.
On Jan 22 02:56 PM brewer wrote:
> Simple. MSFT's growth has gone almost totally to Apple.
>
> And
this
> is only the start. Apple will easily be at 20% userbase in a year
or
> two. MSFT has nothing to compete with any of Apple's products, Mac,
iPod,
> iPhone, nothing even close. A lot of people thought, for a long
time
> that windows was 'good enough' and maybe it was back then, but
Apple
> has gotten far better and MSFT has gotten worse, or at least only
stayed
> rougly the same as it was 5-10 years ago. They never do anything
new,
> they are afraid to kill off any of their cash cows and they cater
to
> 'business' so much that they have no creativity. It doesn't help
that
> MSFT's only 'creativity' in the past was in copying Apple's stuff,
badly.
>
>
> To anyone who is surprised by this, you must not have been paying
> attention.
In theory, MSFT could be a turn around case, but it's priced like a "cash cow" not a company that will be bleeding market share for years to come as management sits around in General Motors like denial. Listen to Sentinel - almost all tech guys think MSFT products are junk. MSFT would have to start from the ground up - with a UNIX-like basis - in order to rebuild its product portfolio. I don't think they'll do it.
Count the chips dude, the total number of CPUs sold is the telling factor. Sure apple has done well , but the total sales of machines is well down.
MSFT is not so much losing sales to apple (wealthy clients buying a "brand") as it is losing sales to BRIC, losing sales to corps and losing sales totighted belts.
Those who are paying an extra 35% for the apple logo were not planning to buy a MSFT OS , and MSFT already knew that.
Toyota Microsoft Disney JNJ are all hurting. Are you going to tell me that Toyota are losing sales becuase they screwed up? The mouse has lost his way?
Or perhaps MSFT woe is merely a reflection of the global **it hitting the fan.
You mean Bill left MS 10 years ago?
Can anyone explain why a large chunk of the 5000 layoffs are R&D people? Wouldn't that be counter-intuitive for a company looking to innovate?
Maybe their plan is just to hold on to their gigantic share of the pie.
The search for new customers has also led software maker Microsoft Corp. to expand its India operations. “A vast majority of the five billion people in the world currently underserved by technology live in emerging countries, so growth for Microsoft or any other company across any industry will come from these geographies,” says Ravi Venkatesan, chairman, Microsoft India Pvt. Ltd. The Indian subsidiary is the only one where the software company’s six business units at present employ about 5,000 people, makes it the second largest employee base—next only to the US. “India is definitely a big bet for Microsoft,” says Venkatesan, who expects to spend 60% of the company’s investments in India on building new products.
Buuuzzzz. Wrong. Guess again. Apple sold a record number of Macintoshes this quarter.
It's a total joke that Microsoft is even in the position it's in. The techie's know it. They both prop each other up. Macs don't even COST more. They are quite often CHEAPER for the same components (as close as you can make them, the PC notebook ALWAYS looks like a smoking pile next to the Apple stuff.) And the Macs even run Windoze faster than ANY PC because MSFT forces the PC companies to hobble their systems with BIOS. Macs have very modern firmware and boot in seconds.
Some people know a good computer when they see one. They enjoy the extra productivity it offers. They are not buying brand. The folks that buy MSFT because 'everyone else does' are buying brand. And not a good one, BTW.
total sales or intel based machines are in fact DOWN. and I am suggesting this is more the issue than apple eating anyones lunch.
Microsoft underestimated the market conditions and did not act quick enough, the foolish decision to pursue Google is making its mark. They should go back to their core business. The PC vendors most of them with Microsoft software sell more than 25 million machines per quarter,
Apple still have a small piece of the cake, so do not be foolish to think that Apple is the market leader, in some aspects they are worse trying to force their customer base to follow them. At least with any other vendor you have options. Windows and/or Linux.
Netbook accounts for 12 million and 80% is Microsoft software, Mac desktop and iPhone sales are down, that is an indication of market conditions not that Microsoft is failing.
Microsoft got a really god chance with Windows 7 and they should be back in top once is out.
There are very nice Linux and Windows machines that will beat Apple machines anytime without spending lots of money.
"Hi, I'm a Mac." "And I'm a PC."
It was a RECORD for the December Quarter. Buzzzz, you are wrong, sales numbers are NOT down, they are UP from ANY comparable quarter.
Your turn.
On Jan 22 05:36 PM jackdee wrote:
> BREWER Buzzzzzzzzzzzz guess you did not read or understand what
> I wrote.
>
> total sales or intel based machines are in fact DOWN. and I am
> suggesting this is more the issue than apple eating anyones lunch.
>
>
>
>
>
>
>
>
And... nearly anyone with any kind of job or allowance can afford an iPod.
You have to realize that microsoft has made projects in this vein...but obviously poorly, because the Zune is a zzzzz. And to not realize that the time chip had no 2009... whew!
they made a poor OS that caused enormous problems and cut into business profits for their customers.
microsofts' 'fixes' take forever and never really work right.
Customer satisfaction is highest with Apple products because the products are better and because Apple actually cares about the customer experience.
Does the logo mean something? Yes. It means quality.
Here we go again....
THE LOW NUMBERS HAVE NOTHING TO DO WITH APPLE.
whew is that clear enough?
the total number of machines sales are down (note for fanboys apple machines only make up a small % of the total they could be up by 500% and the total sales could still be down).
Really how silly are you guys, dont you get it.
MSFT is losing sales not to apple but to the entire world putting off purchases.
Sure apple has sold more then ever, but they are not sales MSFT was expecting , it is the loss of sales to BRIC it the loss of sales to EU it is the high numbers of lower margin XP.
Why MSFT numbers are down is the whole point here, not apple or whether apple is better worse or just a dif seg of the market.
Same goes with Office and Windows - MSFT has always profited by bringing in other developers - remaining one major fish in a great big sea, rather than becoming the biggest, baddest fish in its own swimming pool.