
Microsoft reports record first-quarter revenue of $18.53 billion - coloneltcb
http://www.microsoft.com/en-us/news/press/2013/oct13/10-24fy14q1earningspr.aspx
======
ChuckMcM
Nice boost in their search revenue, if your wondering why Google's CPCs are
going down, that is why. Microsoft has gotten serious about exploiting their
search engine tech and that is having an effect [1]. Unlike 'recuter' I don't
think this is their "Blackberry Moment" :-)

Google is smearing the smartphone market, at the expense of Apple's cash
engine, Microsoft is smearing the Search market at the expense of Google's
cash engine and Linux is smearing the operating system market at the expense
of Microsoft's cash engine. Seems like there is a lot of pressure to
diversify.

[1] [http://techcrunch.com/2013/10/24/pricing-engine-adwords-
bing...](http://techcrunch.com/2013/10/24/pricing-engine-adwords-bing/)

~~~
drzaiusapelord
> Linux is smearing the operating system market at the expense of Microsoft's
> cash engine

Is this true? I don't see too many Enterprise shops going "no more windows,
exchange, and active directory. its ubuntu, postfix, and ldap all the way!"

Linux certainly has killed commercial unixes, but MS Server products never got
popular for web and other areas Linux is traditionally strong in. The fabled
year of the linux desktop never happened.

MS still leads with many enterprise products. For all the hand-wringing over
surface and bing, MS is swimming in money on the enterprise side.

~~~
ChuckMcM
Its true in two very interesting ways -

First it has nearly sealed off the 'cloud' from Microsoft. Sure there is
Azure, and you can ask many VPS providers to put Windows into the box, but
Linux system images dominate the 'cloud' OS space by a large margin. So a lot
of what Microsoft used to sell as 'back office', aka an NT server for a small
business running exchange and maybe Access is shifting over to gmail + AWS.

The other place its getting crushed is of course mobile phones. If it weren't
for licensing revenues from patents the Android (and Linux kernel) would be
doing more financial damage, as it is, the number of 'seats' which run the
operating system of choice are running a Linux derivative. We've talked about
how this is the 'post PC' era, and it is, and the Post PC, whether it is your
Samsung 'smart TV' or your phone, predominantly doesn't pay Microsoft an OS
tax.

So revenues that Microsoft used to get for OS installs are now time limited
patent licenses.

~~~
Maascamp
Don't know if I agree with your first point. AWS got a head start, but Azure
is gaining and fast (Azure revenue - not profit - is at least 30+% of AWS
already). That says nothing about SkyDrive either, which is already the
biggest cloud syncing service out there. So saying Microsoft is getting
"crushed" in the cloud is _far_ from being true.

~~~
duaneb
I think Azure is great, but it remains that people are using linux for their
servers.

~~~
biot
Azure is OS agnostic; Linux runs great on it.

~~~
duaneb
Hence why I said it was so great. My point was that windows is dying as a
server OS, though I'm sure enterprise will keep it kicking for several decades

------
jusben1369
This is impressive. They blew through their numbers. They're showing that they
can offset a slowdown in the core cash-cow via other product lines. Search
revenue increase was particularly impressive.

~~~
MaysonL
Except for the fact that their (non-GAAP) operating income fell 3% (YOY).
Falling profit on rising revenue is a red flag, no?

~~~
HelloMcFly
Falling profit on rising revenue indicates shrinking margins, which should be
an outcome of a capitalist marketplace.

------
300bps
I am a developer at an investment bank that passed the Level 1 Chartered
Financial Analyst exam part of which explicitly tests you on your ability to
read accounting statements. If you are a developer without similar training,
please realize that you will probably sound as uninformed offering your
commentary on this topic as would an equity analyst giving their opinion on
pages of C code.

~~~
nilved
This may be the most pompous comment on HN, a forum known for its pompous
comments. Congratulations.

~~~
300bps
_This may be the most pompous comment on HN_

Who is more pompous? The people thinking they are intrinsically expert at
financial analysis posting here or the person that points out how silly they
sound?

Seriously, picture a real financial analyst with no computer background
reading your Ruby code and drawing all kinds of nonsensical conclusions from
it. You'd probably laugh your head off when they read a comment in the code
and thought that it was a functional instruction. That's the type of things
developers are doing here with their armchair financial analysis.

~~~
TranquilMarmot
A financial analyst may not be able to critique my code, but he can certainly
tell if my program works or not and offer his opinion on how it should work.
His take on it is not invalid just because he doesn't know how to program.

The same can be said for this- I can look at it as a developer and get a
general idea of how Microsoft is doing. I may not know all the intricacies
behind it, but that doesn't mean my input should be thrown into the trash.

------
netpenthe
For those people doubting the future of MSFT, here is my take:

MSFT is both a tech company and a utility.

It has growth potential (phones, surface, search, xbox) but it is also
completely essential for global business (servers, AD, SQL Server, Exchange,
Sharepoint).

In that sense it is a utility. If you took out all the MSFT software in the
world everything basically stops. Your electricity probably doesn't work, you
probably can't get on a train to get to work and if you manage to get to work
you can't login to anything.

People say "but my company has BYOD!" that might be true, but MSFT is still
the infrastructure it is running on. You can bring your AAPL car but you're
still driving on an MSFT road.

------
mrb
Note the keyword is "first-quarter". Usually for Microsoft the first quarter
of the fiscal year is a little below other quarters. But this first quarter is
still below what MS typically achieves the other 3 quarters of the year:

\- 1st quarter of last year: $16.01 billion

\- 2nd quarter of last year: $21.46 billion

\- 3rd quarter of last year: $20.49 billion

\- 4th quarter of last year: $19.90 billion

\- 1st quarter of this year: $18.53 billion (the "record" one)

~~~
teamonkey
I assume that pattern is due to businesses not starting new purchasing orders
until the start of the next financial year?

------
paul_f
For those of you who continue to predict the demise of MS, it might be worth
mentioning that Microsoft has a quite broad range of products and they
primarily sell to enterprise customers who are notoriously non-fickle.

~~~
mikelat
Microsoft's ventures are very much dependent on their operating system though,
making the entire company like a house of cards. If their operating system
monopoly ever goes, the entire company would collapse with it since they're so
dependent on it. The only other successful product they have that isn't
dependent on windows right now is xbox, and that's a very volatile market.

Google is similar in the fact that a lot of what they do depends on internet
ad revenue.

~~~
clavalle
What? First, they have enough cash to weather quite a lot of financial upsets.

But to say they are dependent on their OS for revenue is silly.

SQL Server income is not dependent on the OS -- anything can talk to it. Their
cloud solution is not dependent on their OS. Search. Even Lync and Office can
be used with other operating systems.

~~~
heartbreak
Does MSSQL run on Wine?

~~~
clavalle
I am hesitant to put any unnecessary software layers between my databases and
the hardware so I wouldn't know.

But it doesn't matter. Even if everyone stopped buying and using Windows
tomorrow /Microsoft/ could still use it. MSSQL is not dependent on a thriving
market for Windows. Anyone that needed to administer the machine could just
RDP into it.

------
us0r
Why are we comparing Microsoft to RIM?

RIM was a one trick pony. Microsoft has several billion dollar businesses.

------
Zigurd
If they want to translate the great performance some parts of Microsoft are
having into a Google-like stock price they should break Microsoft up into
business and consumer companies.

Critics of Microsoft are wrong to call it's enterprise business a dinosaur.
There is no reason to think Microsoft won't continue to grow this business for
decades to come.

But I would like to be able to own this as a pure play, not mixed up with
XBOX. Let's call this company "Azure" and spin it off, like HP did with
Agilent (which should have been called HP), and let the "devices and services"
part screw around with reinventing itself.

------
devx
Windows revenue is (finally) down. I say finally only because many people
wouldn't believe this would happen, even a few quarters ago. That could be
quite a problem for Microsoft over the next few years. Right now they are
offsetting that with enterprise deals, but do they really think that's safe
for them? RIM did, too.

~~~
tanzam75
> _Windows revenue is (finally) down. I say finally only because many people
> wouldn 't believe this would happen, even a few quarters ago. Right now they
> are offsetting that with enterprise deals, but do they really think that's
> safe for them? RIM did, too._

If anyone is surprised by this, then that person has not been reading
Microsoft's financial statements.

Windows revenues were also down year-over-year in Q4 of fiscal 2013, and in Q3
of fiscal 2013, and in Q1 of fiscal 2013. (Non-GAAP in all cases, to back out
the effect of revenue deferrals.)

As for RIM, I don't see what it has to do with Microsoft. RIM didn't have
platform lock-in -- all they had was email.

In contrast, analysts estimate that IBM still derives 40% of its profits from
mainframes. ("Estimate" because IBM plays accounting games to minimize the
contribution of mainframes.)

------
umeshunni
$400M in Surface revenues. At even a generous $400 unit price, that's only 1M
sold this quarter. Probably closer to 700K if you consider some of them being
Surface 2 priced up to $900.

~~~
rsoto
There are costs associated with each sale, not everything is revenue.

~~~
tanzam75
> _There are costs associated with each sale, not everything is revenue._

"Costs associated with each sale" are irrelevant when considering revenue.

If you spend $400 to make a $500 sale, it's the same as if you spend $100 to
make a $500 sale. Both are $500 in revenue. What's different is income, which
is revenue minus costs.

~~~
teamonkey
I think the OP means that $400 is the retail price of a Surface, but the
revenue listed in the report will be based on its wholesale price.

------
aabalkan
Stock price just hit after hours $35.63 (up 5%), good news for Microsoft
employees indeed.

------
epa
Don't forget these are un-audited and don't really give us much information
other than what they want to show us.

~~~
tanzam75
If they play games in Q1, then they'd simply take a hit in Q4. The annual
report is audited, and the quarterly numbers have to add up to equal the
annual numbers.

It wouldn't look good to play the Surface write-off trick twice in a row.

~~~
epa
I don't see your point. These numbers are quarterly growth numbers since the
audited year end statements. It has nothing to do with their upcoming year end
or future quarters. They tell us the positive things but don't show us
anything related to expenses or actual revenue dollar amount
increases/decreases.

------
eddiegroves
The enterprise and business division is turning into a juggernaut at Microsoft
that shows no sign of slowing down. Unlike the Windows team, they have a clear
focus and vision guiding them.

------
dschiptsov
Well, junk^Wfast-food chains also growing, so what? What is popular ins't even
good in the most cases. Just a Bandwagon + Peer effects as it is in case of
Java.

And, of course, defacto server-side OS is Linux. So-called Desktop will be
theirs for a long long time, but not because the OS is of any good - it is
meaningless a bloatware, but because of word.exe and excel.exe which it seems
to be here forever.

As for their services, well, forcing sheeple to use IE and Bing by re-writing
their browser's settings doesn't account for even for popularity. IE is crap
compared to Chrome, and even some sheeple could see that, but most of them
just doesn't know any better, so they got stuck with IE and Bing.

And to appreciate the absurdity, just look what is happening with all those
Java apps, which are supposed to run everywhere, with each new release of
Windows, which are supposed to be 100% backward-compatible.)

~~~
dagw
_defacto server-side OS is Linux_

Is it? Sure it's fairly defacto for public facing web servers, but servers in
general? Given how hugely popular Exchange, Active Directory, SQL Server and,
to a lesser extent, Sharepoint is I imagine that Windows servers are pretty
darn popular (or at least common). You just don't see them if all you're
looking at is public facing web servers.

~~~
dschiptsov
Any of these inside FB, Google and most of startups? How many startups really
develop _anything_ for MS platform?

Well, _really_ good tools like Go allows the same server-side code to be ran
under Windows, the real question is what for?

~~~
TheAnimus
I'm using SQL server, Server 2012 R2.

We can't use public cloud. Need our own private hardware for legal reasons.

The load isn't high, we have a high value per client, low client count
business model.

The ease at which I can have a private cloud. Data replication and clustering,
full Hot-Hot style DR solution, hosting on MS technologies is great.

I can get due diligence sign off from SQL Server which I could not for say
Postgre, this would be due to the fact the replication component isn't vetted
and considered secure/authoritative by my clients.

Then I do the maths, once bizspark ends, the total cost for all these licenses
is going to be about $30k per year. We hope to have revenues of about thirty
times that by then.

But better than all that. How long does it take to set up this replicating,
elastic cloud, with replicated database? Not even a day.

I couldn't do that with Oracle!

Bizspark means right now that we don't have to worry about the costs compared
to going VMware.

Now in the world of startups whom have 100,000 users to make $10, then yes,
the cost of these technologies is going to be hard to justify!

~~~
waps
You set up a "full Hot-Hot style DR solution" in one day ?

Did you try actually failing it over ?

~~~
TheAnimus
better, I also got it set up with selenium doing a set of tests, my own
version of a chaos monkey (a powershell script) that created failing
instances, all triggered as part of a TeamCity process.... Too much faff to do
it in TFS. The glue code for this is truly horrific, I'm thinking of buying
ranerex.

I've not yet linked it up to the build quality (which I want to do) and I'm
also thinking of making a more Windows Focused Chaos Monkey OS project. I
dislike the idea of testing only that a VM stops. I want to see what happens
if I hammer say its CPU with a few higher priority threads. Or simulate insane
network latency, or some other networking quirk.

I worry I am only testing against very well behaved nodes disappearance.

Ultimately I'll have a nice little dashboard, which allows me to switch
instance between UAT2/PROD, that shows me the available reserve for each
environment. I'm toying with making some OWIN extension that allows me to
control which components are loaded. For example, we have a 'chat' component,
which is obviously not essential. I'd love the idea of automatically failing
that. As we add more value add features, certain models and the like which are
CPU demanding, these features will not have any uptime guarantee, so I'd like
to automatically throttle them, in the case of a catastrophic failure (like a
DC loosing connectivity).

I am looking for something 99.999%. I've got three physical separate DC sites,
each DC site has 3 or more servers. We could run the entire system on one
server, easily.

------
Theodores
Here us the Google Trends graph showing the decline in the search terms
'Microsoft' and 'Windows':

[http://www.google.co.uk/trends/explore?q=microsoft%2C+window...](http://www.google.co.uk/trends/explore?q=microsoft%2C+windows#q=microsoft%2C%20windows%2C%20android%2C%20iphone&cmpt=q)

For comparison there is the trend for 'iphone' and 'android'.

Sure Microsoft are doing loads of exciting things but people aren't typing
'Microsoft' or 'Windows' into the search engine box of Google as much as they
used to. Make of that what you will.

~~~
ucha
Well, if you search for "windows safe mode", that went down too and "windows
[version] safe mode" is systematically in the top 5 suggestions after "windows
[version]". That may mean that people search less for windows because it
became more stable. Good news!

[http://www.google.com/trends/explore?q=windows+safe+mode#q=w...](http://www.google.com/trends/explore?q=windows+safe+mode#q=windows%20safe%20mode&cmpt=q)

My point is that, yeah, getting conclusions from that is hard...

------
spoiledtechie
In other news, they still only pay 5% taxes due to offshore accounts.

------
rch
I switched my default search in chrome to bing when the new tab page changed.
I've since fixed the tab page, but left the search provider alone for now to
see what differences I notice over time. So far, it's OK, but fails to give me
my geek-centered results for generically named things like orange and amber.

------
skc
The overwhelming need to poo poo these results in here is pretty disgusting
though expected I suppose.

I'm interested in following those Surface numbers over the course of the next
year. If they can get that revenue up to about a billion, they will have done
very well. And I think they can do it.

------
tomkin
_cough_
[https://news.ycombinator.com/item?id=6263205](https://news.ycombinator.com/item?id=6263205)
_cough_

------
JPKab
They will continue to milk the enterprise cow, but eventually even they will
dry up.

~~~
outside1234
I know everyone here wants to believe that but their percentage of penetration
in enterprises continues to rise and the breadth of their offerings as well.

They are growing more cows and expanding their offerings to other herds (see
Java support, node.js support, Linux support, ...).

~~~
seanmcdirmid
> I know everyone here wants to believe that

Factually speaking, some of us here don't want to believe that, especially if
we work for Microsoft.

------
recuter
Headlines from Dec 18th, 2009: "BlackBerry shipments break record in Q3, RIM
profits jump 59 percent".

Also known as the Wile E. Coyote Syndrome.

~~~
tedunangst
You could literally post this comment every time every company from Google to
Netflix have record revenue.

Also known as the even a broken clock is right twice a day syndrome. :)

~~~
recuter
Not at all. RIM was screwed when the iPhone was announced, and despite
dismissing it publicly (just like Microsoft did) they knew that internally but
did nothing.

That lack of leadership sealed their fate.

Google and Netflix are firing on all cylinders not placating Wall Street with
short term profit surges.

~~~
curiousDog
You're right about the lack of leadership. But as someone who has worked at
both RIM and MSFT, they're vastly different. Moving out of the MSFT platform
for example isn't exactly as simple as switching out a couple of servers and
handing out new phones to employees. Also, there's innovation on the
enterprise side of things (very cool stuff (on par with google) being done in
Azure, SQL Server, Visual Studio, .NET, Dynamics CRM, Skype/Lync, Sharepoint
etc.) which I think where most of the money will eventually come from (and the
trends suggest that)

------
gesman
MSFT's todo list to boost revenues:

1\. Accelerate Ballmer booting out process. Why's he still there?

2\. Boost Cloud.

3\. Boost enterprise services and everythings.

4\. Stop wasting resources on stupid consumer widgets department.

