Microsoft's Q1 Figures Plummet As PC Market Splutters & the World Waits for Windows 8

The financial earnings numbers keep piling up — and after a week of poor performances, the closing bell in the stock exchange is beginning to sound a bit like a death knell. Last night, Microsoft released its figures for Q1, which fell by 22 percent on the same time last year as the PC market tries to pull out of a massive wobble.

Microsoft’s Windows 8

At this point, after looking at all the figures, the wobble is beginning to look like a terminal skid on the black ice of tablet sales. But with Windows 8 in the works for next week, Microsoft is hoping to get itself back on track.

While there are a lot of positives to be taken from the figures — despite the fact that, in most business sectors Microsoft declined — everyone was focused on PCs. Specifically, they are wondering whether the Windows 8 OS will have enough umph-factor to create interest in a market that has gone tablet mad.

Indeed, most analysts suggest the timing of the Windows 8 release is a response to the growing popularity of tablets, since it includes new functionality that favors touch screens aimed at PC makers. Those PC makers are already talking up new ranges of laptops that will be able to double as tablets with detachable screens, or screens that fold down onto the keyboard. Is this where the Microsoft rebound will happen? Only time will tell.

Microsoft Q1

But returning to the figures; Microsoft was well below analysts’ expectations. Net earnings dropped by 22 percent, from US$ 5.74 billion this time last year, to US$ 4.47 billion for the quarter ending September 30 this year.

Revenues were US$ 16 billion, down 8 percent from US$ 17.4 billion in the same quarter last year. Revenues from Windows declined 33 percent to US$ 3.24 billion  — though if Microsoft had not deferred revenue related to Windows 8, that decline would be only 9 percent

Even the lucrative business applications division that develops and sells Microsoft Office products, which would normally be sustained by a buoyant PC market, declined by 2 percent, to US$ 5.5 billion in this quarter.

The Server & Tools business reported US$ 4.55 billion in first-quarter revenue, an 8 percent increase from the prior year period, driven by double-digit revenue growth in SQL Server sales and more than 20 percent growth in System Center revenue. This was also helped by the release of Windows Server 2012.

Standing back and looking at the numbers as a whole, they are in keeping with the figures of other major players in the market. IBM, which also reported earnings this week missed out on analysts’ expectations.

Microsoft’s PC Market

But for Microsoft, the real issue is how the PC market is going to hold up in the coming months and whether Windows 8 is going to help it pull it out of the doldrums.

The company is betting hard on this release — the biggest software product from Microsoft in years — with a US$ 1 billion global advertising campaign (already underway in the US) to counter act any negative feelings users may have about changes in Windows 8.

In fact, for this quarter Microsoft is using Windows 8 to explain many of its ills, which sounds a bit like placing too many eggs in the same basket.

While enterprise revenue continued to grow and we managed our expenses, the slowdown in PC demand ahead of the Windows 8 launch resulted in a decline in operating income. Multi-year licensing revenue grew double-digits across Windows, Server & Tools, and Microsoft Business Division products as businesses commit to our technology roadmap,” said Peter Klein, chief financial officer at Microsoft.

 

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Source : cmswire[dot]com

Microsoft Makes a Marketing Automation Play With MarketingPilot Acquisition

Anybody that had doubts about Microsoft’s commitment to service got more proof this week. Only days before its second quarter earnings announcement, the company announced plans to acquire cloud storage vendor StorSimple and that it closed on a deal to buy marketing automation provider MarketingPilot. Should Salesforce be concerned?

Head in the Clouds

Microsoft is using every opportunity it gets to let us know it is no longer just a software company. Microsoft’s most recent annual report, released earlier this month, included a letter from CEO, Steve Ballmer, reiterating to shareholders that it has evolved into a “devices and services company.” This week the software giant has been busy putting its money where its mouth is.

On Tuesday, October 16, Microsoft announced its intent to purchase StorSimple, which provides an appliance for Windows and VMware that integrates cloud and on-premises storage. Microsoft plans to leverage the technology in its hybrid cloud offerings.

The next day, the company announced the closing of a deal to acquire MarketingPilot, a marketing automation software provider.

Microsoft is always buying something, but the latest round of acquisitions signal a significant shift within the company, which has made its fortune selling software. Windows and Office have long been the main contributors to Microsoft’s profitability and growth. These product families aren’t going away any time soon, but Microsoft realizes consumers and companies are increasingly choosing cloud-based solutions instead of locally deployed software. In addition, more businesses are adopting an IT-as-a-service model, which encourages delivering capabilities as discrete units of service that can be aggregated into more sophisticated offerings. This is driving Microsoft to invest heavily in the cloud and service oriented offering.

The terms of the deals have not been disclosed. Microsoft promises to release more details at the Convergence conference in March.

Other Trends

Microsoft’s acquisition of MarketingPilot is also a part of another major trend — customer engagement. Although the cloud technology and marketing automation may seem unrelated from a business perspective, they aren't. Businesses want holistic, highly integrated, flexible solutions that “just work.” They want the same thing in their interactions with customers and leads. 

Many traditional content management and customer relationship management (CRM) vendors have been adding features that allow business to manage content, marketing campaigns and customer engagement from a single platform. Microsoft may be preparing to follow their lead. The MarketingPilot purchase is being handled through Microsoft’s Dynamics CRM, which could mean customers will soon see marketing automation modules be natively integrated in the platform. There is also an opportunity for marketing automation to come to SharePoint.

Oracle, Microsoft and IBM now own all of the components to create their own Salesforce-like offering. However, none of the companies has put the components together in an easy to use, subscription-based package. If Microsoft decides to move in that direction, they could eventually provide a fair amount of competition to Salesforce in the small and medium business sector because of their will established position in the market.

 

 

Source : cmswire[dot]com

HP Suffers Biggest Loss In Company History, Autonomy Still Requires 'Attention'

If HP investors were expecting Meg Whitman to produce a miracle at HP and turn the company around in 12 months, then last night’s earnings call will have disappointed. The hardware-software giant announced a Q3 loss of US$ 8.9 billion — its biggest quarterly loss in its history with Autonomy dragging on an already poor performance for hardware sales.

HP Job Losses, Write-downs

However, Whitman insists that everything is on track and that what we’re seeing at the moment is the early stages of a turnaround that will see HP back where it belongs in the long term. She warned, though, that it wouldn’t be easy, a fact the 4000 people that lost their jobs in restructuring over the past year will testify to.

Before looking at the information that was given about the performance of its US$ 11.7 billion acquisition last year, let’s take a quick look at some of the figures.

In a pretty weak global economy, HP hasn’t done as well as some of its counterparts, who have also been suffering from weak demand, but have still been able to push the bottom line in the right direction.

The month started badly enough for investors when earlier on HP announced that it would be posting a bigger-than expected charge in the third quarter in relation to its workforce reduction plans. The idea is that 27,000 people worldwide would go, and with four thousand gone over the year, the costs of this look pretty steep, although figures on this are not available.

A further 11,500 are expected to leave the company in fiscal year 2012 — which ends at the end of October — as opposed to the 9,000 that HP had originally announced. Another 15,500 employees will be let go through October 2014.

Also in this quarter — and the reason behind the US$ $8.9 billion loss it announced for the quarter — are the plans announced to take an $8 billion charge to reflect the shrinking value of Electronic Data Systems, a technology consulting service it bought for US$ 13 billion in 2008.

Third-Quarter Revenues

Overall, revenue for the third quarter fell 5 percent year over year to US$ 29.7 billion, US $500 million less than analysts had expected. Without the write-downs and other once-off costs, though, HP did OK in a very sluggish market.

Profits without these costs would have been US$ 1.97 billion, down 9 percent year over year, but in keeping with what’s happening in the wider global market as businesses in many geographies hold off on spending until the direction of the global economy finally becomes clear.

Another highlight was that software sales rose 18 percent to $973 million, driven by last year's acquisition of Autonomy, even if licenses grew by only 2%. Software-related support revenue was up 16 percent and software services rose 65 percent.

The PC market also remains weak, with PC revenue down 10% year-over-year, driven by this weakness and an aggressive pricing from competitors, Whitman said. She added:

The reality is we're locked in serious, competitive battles, but we're determined to win. We will fight to sustain our leadership position, particularly in the Commercial space, while remaining focused on profitable growth. To this end, we are executing targeted marketing and promotional programs to support the business in Q4.”

Autonomy, HP

For information management professionals — and for the financially bloody-minded — the real interest in these figures was what has happened with Autonomy; after all, while HP did spend a huge whack of money to buy it, it did buy one of the more interesting products in the information management space with IDOL.

 

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Source : cmswire[dot]com