
Microsoft profit jumps 51 percent with record Q1 revenue - arst
http://blog.seattlepi.com/microsoft/archives/226445.asp
======
andrewljohnson
Everyone who talks about the death of Microsoft and their lack of innovation
has never met any Microsoft engineers.

The culture may be suffering a malaise right now, but they have a lot of
money, and a lot of talented people. And they seem to be making many violent
changes as we move away from the Windows/Office hegemony years, which is
clearly the right strategy.

They may never have the robot-cars culture of Google, but they will always
have a great-software culture.

~~~
seldo
Yahoo has a ton of cash and an army of really great, smart people who want the
company to do well, but after 4 years there I was forced to conclude that the
ship could not be turned around. I imagine that Microsoft is the same.

~~~
palish
I'd love to hear more about your experiences.

~~~
seldo
Is that sarcasm? I feel like "<x> was <this way> at Yahoo" is pretty much all
I ever talk about here :-)

~~~
Shamiq
I believe he was being sincere. Perhaps something a bit more analytical and
introspective with regards to the company?

~~~
seldo
Well, since you both asked...

I joined Yahoo in the Mobile division soon after the Flickr and Delicious
acquisitions, when it looked like Yahoo had grasped the importance of
including social elements and user-generated content into its experiences.

Fundamentally Yahoo is an advertising company that failed to understand the
value of self-serve, long-tail advertising. It preferred the high-margin,
high-touch sales approach with big media customers that had kept them alive
through the first dot-com crash. Fair play to them: clinging hard to those
media dollars was absolutely the right move for survival. But they missed the
boat and, critically, failed to acquire Google for $1bn -- something that
Semel seriously discussed with Page and Brin sometime around 2002.

The next-best thing after failing to buy Google is create their own. They did
this by buying Overture and Inktomi, which together became the core of the
post-Google Yahoo Search (remember, search on Yahoo was powered by Google
until 2004). In terms of search accuracy, Yahoo had roughly matched Google by
around 2006, but on the monetization side their algorithmic yield-optimization
for keyword ads was awful compared to Google, and despite massive engineering
investment remained so until they got out of the game by selling to Microsoft
in 2009/10 (not that Microsoft is much better at that, I hear).

If you accepted that they had missed the boat on self-serve keyword
advertising (which internally nobody ever did), the next-best thing they could
do was massively increase page impressions by creating a blockbuster, high-
page-view, sticky product. This would maximize the value of their still-
excellent display ad business. By 2003/4, it was clear that social networks,
like Friendster and relative newcomer MySpace, were exactly that kind of
product. Here again, an acquisition would have been smart (though less
obviously smart than Google).

Instead Yahoo tried to get into the game with Yahoo 360, a home-grown social
network. This was at least the right strategy, but here again they simply
failed on execution. 360 was buggy, ugly, confusing and lacked activity
streams, which turned out to be a key feature of Facebook's subsequent
success. No bones about it here: they had a gigantic number of users they
could drive to 360 from the front page. If 360 had been at all compelling,
they could have dominated social networking overnight.

So, four major failures behind them, in 2008 they saw the huge success of
Facebook and tried to turn social: thus came YOS, the Yahoo Open Strategy.
This included new Yahoo Profiles (a second attempt at social networking), and
YAP, the Yahoo Application Platform, the last product I worked on before
leaving. YAP was supposed to be a sort of cross between Google App Engine and
Facebook Apps, where we would simultaneously distribute your app via our
social streams and scale it on our infrastructure. This was a brilliant idea,
I still think.

But the execution was a clusterfuck from start to finish, the gory details of
which I'll skip. The final product was nothing like the original idea, and
ended up a half-assed knockoff of Facebook Apps, but without any kind of
traction. And in the meantime, it turned out Facebook Apps were a flash in the
pan and Facebook had pivoted to Facebook Connect.

So that's my four years at Yahoo: missing one big opportunity after the other,
despite multiple swings of the bat. It's not that we couldn't see what needed
to be done. We just couldn't, organizationally, move fast enough and bravely
enough to get anything good out the door before somebody else ate our lunch.
And I didn't see that changing any time soon, so I left.

Which is a shame, because I really love Yahoo. It's a good-hearted, fun
company, good to its employees, and full of people who genuinely care about
our users and building great things that improve people's lives and make money
at the same time. But sclerotic management and organization seems to have
doomed it permanently to mediocrity. It's not going to die, but it will
continue to lose relevance.

[To my fellow Yahoos who read HN: I hope you don't think this is too harsh. I
love you guys!]

~~~
brisance
Thanks for sharing your story; and it does seem similar to what PG
experienced:

<http://www.paulgraham.com/yahoo.html>

Seems that the aphorism: "don't explain concepts to someone whose salary
depends on his not understanding them" applies.

With regards to this particular topic, then, I would concur with the popular
opinion that Microsoft's Windows and Office cash cows are too valuable to be
offered as sacrificial lambs at the altar of cloud/mobile computing.

------
mjfern
Despite today's news about Microsoft's record Q1 revenue, I'm concerned about
the company's long-term prospects in computing.

Looking at Microsoft’s recent annual report, filed on June 30, 2010, Microsoft
generated 83% of its revenues and 98% of its profits from the following three
divisions: Windows & Windows Live, Microsoft Business Division, and Server and
Tools. While these divisions include a collection of products and services
(e.g., Azure), it appears that most of the revenues and almost all the profits
of these divisions is driven by Windows (desktop and server) and Microsoft
Office.

Its remaining two divisions – Online Services and Entertainment & Devices –
encompass all of the company’s consumer products outside of Windows and
Office, such as the Xbox 360, Bing, Windows Mobile, and Zune. In 2010, these
two divisions accounted for the remaining 17% of Microsoft’s revenues, and had
a collective operating loss of $1.676b. In fact, between 2008 and 2010, these
two consumer-focused divisions generated an aggregate of $3.353b in operating
losses.

Looking across its five divisions, we can conclude that Microsoft generates a
majority of its revenues and nearly all of its profits from Windows and
Office. And while Microsoft has found some success with other enterprise
products (e.g., SharePoint, Microsoft SQL Server, and services), its consumer
strategy, outside of Windows and Office, is struggling.

From my vantage point, the two key questions for Microsoft are:

1\. In what timeframe will Microsoft face downward pressure on its Windows and
Office revenues and profitability, given the transition from desktop computing
to thin devices and cloud services?

2\. Can Microsoft develop and execute a corporate strategy in the consumer or
enterprise markets, outside its stronghold of desktop computing? And will this
strategy substantially compensate for any disruption in its core market of
desktop computing?

My sense is that the transition from desktops to cloud services and thin
devices is accelerating due to rapid innovation and growing competition among
Amazon, Apple, Facebook, Google, Netflix, Salesforce.com and others. Further,
Microsoft has thus far underperformed in cloud services and thin devices, from
search (Bing) to smart phones (Windows Mobile). In view of Microsoft’s
dependency on Windows and Office, and its inability to gain significant share
in newer growth markets, I am concerned about its long-term prospects in
computing.

~~~
Shamiq
My team is working on this product:<http://crm.dynamics.com/online/>

We're massively ramping up as we get closer to our 2011 Q1 RTW ship dates, and
the product is way more polished and functionally relevant than our
competitors. Heck, I even think our marketing team has bought some massive
advertising on money.cnn.com

We're very excited.

~~~
sahaj
Just a usability thought on the site...

Try this: mouse-over "TRY IT TODAY" and then try to click on "GET STARTED".

The natural instinct is to linearly move the mouse to "GET STARTED", but in
doing so you trigger the "REAL-TIME INSIGHT" mouse-over action.

~~~
Shamiq
I see what you're saying. I'll get the right people involved.

~~~
Shamiq
Okay, I actually got a really fast turn around from my PM team (given that
we're Seattle based). A video repro of your issue + a link to your comment was
fired off to the person who "owns" that site, so we'll see what they do about
it!

Thanks so much!

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gamble
This is also the first quarter where Apple's revenue was larger than
Microsoft's:

[http://www.appleinsider.com/articles/10/10/28/apple_beats_mi...](http://www.appleinsider.com/articles/10/10/28/apple_beats_microsoft_in_fall_quarterly_earnings.html)

Microsoft is still more profitable, for the moment.

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jnagro
i believe their consumer profits are not what they used to be, this money is
from companies buying W7 after not buying Vista - delayed upgrades.

<http://bit.ly/aA1u4l>

~~~
Devilboy
[http://money.cnn.com/2010/10/27/technology/microsoft_pdc/ind...](http://money.cnn.com/2010/10/27/technology/microsoft_pdc/index.htm?cnn=yes&hpt=T2)

