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Microsoft reports first quarterly loss ever (msn.com)
272 points by sbashyal on July 19, 2012 | hide | past | web | favorite | 116 comments



Microsoft has been pouring money onto everything until they monopolize it. It worked really well and annihilated a lot of competitors by the way.

I remember the times Microsoft will literally buy you to develop for the xBox or DirectX. I was there and then I saw the people that got bought to say that they felt "trapped" and could not get out from MS tech.

But as new companies with big pockets got into the game, first Google, then the new Apple and then Facebook, the last one with so much money and not really knowing what to do with it, the game did not worked as well as before.

The Microsoft Zune did not work out, Life, Bing and now Lumia are not working out as expected, even after pouring billions from their desktop and Office monopoly.


A nice concrete example of the principle that companies cannot manipulate the market in the long run.


Well, two points here.

First, Microsoft has had to play pretty carefully in the past decade to make sure that they don't draw any more antitrust ire.

The other thing would be that they don't have to manipulate the market forever, just long enough to lock out competition.

A perfect example of this in the tech world would be Intel.

They did everything they could to keep AMD locked out of vendors like Dell for years, even when AMD had a superior product. Fast forward a few years, and not only is Intel still the dominate player in the market, but their lead in process technology makes it extremely difficult if not impossible for anyone else to compete. For example, Ivy Bridge has a slightly higher transistor count than AMD's Bulldozer, but has a die roughly half the size of the AMD part.[1] That means that even if AMD was producing a part that performs competitively with Intel, they're going to have difficulty competing with them on price since Intel can crank out more dies per wafer.

Obviously it's entirely speculative whether AMD would have been able to capitalize on increased market share and keep up with Intel long term but Intel doesn't really need to manipulate the market like they used to anymore since they've managed to put themselves in such a comfortably entrenched position.

[1] - http://www.anandtech.com/show/5771/the-intel-ivy-bridge-core...


I feel like your example of this is actaully a perfect counterexample.

If Intel really could manipulate the market successfully, AMD would not exist at all, instead of just having slightly lower profit margins but otherwise similar products, as you describe.

And also, there wouldn't be ARM, which seems to be taking more and more marketshare from Intel. Intel couldn't "lock them out."

And by the way, I think the antitrust action against Microsoft accidentally helped them maintain marketshare. If they had been allowed to continue integrating IE into Windows at the expense of much better browsers, that would have been a boon to Apple and Linux. IE isn't such a huge kludge/security problem now, but it used to be a serious competitive disadvantage. (This is just a hokey theory only tangentially related to the discussion, though.)


>If Intel really could manipulate the market successfully, AMD would not exist at all, instead of just having slightly lower profit margins but otherwise similar products, as you describe.

AMD has been less than financially healthy for years. They've spun off Spansion and GlobalFoundries in the past few years trying to keep head above water.

The point is that Intel was successful in keeping AMD from being able to expand its market share when AMD had a better product and the two were much closer to parity in terms of manufacturing process than they are today. As a result, AMD couldn't afford to reinvest in manufacturing and design, and Intel was able to widen the gap between them.

AMD is still afloat, but they're nowhere near the threat to Intel that they were circa 2000-2005.

>And also, there wouldn't be ARM, which seems to be taking more and more marketshare from Intel. Intel couldn't "lock them out."

ARM was in a completely different market segment that Intel didn't really view as a competitor. As things shift toward mobile, Intel is starting to address that segment, and I think that the process advantage they hold could end up being an even bigger deal there since overall package size and power consumption is such a major factor in mobile. Even if your design is equivalent or slightly better than Intel's from a performance per transistor standpoint, Intel can still win out by being able to churn out more chips than you can at the same cost.

>IE isn't such a huge kludge/security problem now, but it used to be a serious competitive disadvantage. (This is just a hokey theory only tangentially related to the discussion, though.)

Microsoft's bread and butter is the enterprise and IE is still a huge competitive advantage for them there. We're tied hugely to Windows at my workplace almost entirely because of IE.


I have a strong suspicion that Intel is happy to let AMD continue existing just to ward off possible antitrust troubles.


There's the old saying, "If Apple did not exist, Microsoft would have had to invent it." The same is true of AMD, from Intel's perspective.


Well, you're just moving the goalposts there. Intel and NVidia still quite dominate AMD in the desktop/laptop.

By the way, ARM couldn't touch Intel if they wanted. ARM's market is not just another league, it's not even the same game. Even so, where low-power x86 vs. ARM can be viable, Intel will win, by default.


At this point, I think Google should have more worries about antitrust. Google is very aggressive about bundling G+ with everything. I didn't want to get on it, but I was on gmail, Youtube, and a few of their other products, and they stopped working well without it. Once I was on it, there is huge social pressure to use it.

Google Chat, I didn't want, but it was integrated into gmail. Suddenly, I'd have chats from friends pop up as I was working. I presume there's some way to unbundle, but at this point, it's too late.

List keeps going. Google is crushing competitors not by building better products, but by using search to steer them there, and the rest of their chain to force users into them.

Google's motto seems to have changed from indexing and organizing the world's information to hoarding, organizing, and locking down the world's information.

Like Microsoft, they're also getting less and less competent. 6 years ago, their software was phenomenal. Today, it's kind of below average -- they've had a huge brain drain to startups, Facebook, and other places (except for Google X, which seems to be poaching quite well).

It's not as bad as Microsoft in it's prime, but it's getting there. I think in a year or two, they'll actually be worse.


This is kind of a silly comment. Google is only crushing competitors where their services are actually superior. Dropbox still exists and I assume has many more users than Drive. Facebook still exists and is still by far the most successful social network. And even in an area where they were pretty much the first in the field, Maps, there is new competition from Open Street Map. These are just some examples.

People who really don't like Plus and its integration into everything seem to keep using it as some kind of example of Google using monopoly power to force it and its other services to market domination. This just doesn't seem to me to be how it's working. And it completely ignores the fact that all it's actually quite useful to the majority of users, the ones who don't for whatever reason have a problem with it.

> Google Chat, I didn't want, but it was integrated into gmail. Suddenly, I'd have chats from friends pop up as I was working. I presume there's some way to unbundle, but at this point, it's too late.

What does this even mean? Just set yourself to invisible or sign out, and don't go back.

Your "locking down the world's information" comment doesn't seem to make much sense either considering Google is one of the few (if only?) companies to have a data liberation teem, with the explicit goal of making all of your information exportable from Google.

And finally, to call Google's software in general "below average" is just weird. Think about it. Really. It's a weird statement. Their software is better and does more than it did 6 years ago, but has somehow gone from amazing to below average.

IMO Google still isn't anywhere near what Microsoft is. It has quite a long way to fall, if it does.


This is kind of a silly comment. Google is only crushing competitors where their services are actually superior.

And yet here we are: http://www.bloomberg.com/news/2012-07-16/google-antitrust-pr...

http://www.businessweek.com/news/2012-01-24/google-faces-eu-...

http://siliconangle.com/blog/2010/10/28/google-clarifies-adw...

They may not be guilty of any of these accusations but they are probably better off taking measures to be as transparent as possible rather than continuously defending themselves...


Or an example of seeing what you want to see.

Microsoft still has an effective desktop OS monopoly. Last I bought a computer, I still had to pay a Windows tax. So their long-run market manipulation seems to be alive and well.

It's true that they haven't been able to dominate new markets effectively. But that says more about the volatility of technology and Microsoft's fear of another Department of Justice beat-down than it does about any principle of economics.

The Internet was a once-a-century disruption. (One that could well have been throttled in its cradle had AT&T not been broken up by government intervention.) Counting on lightning strikes like that, rather than robust regulatory support of competition, strikes me more as a religious outlook than a practical one.


> Last I bought a computer, I still had to pay a Windows tax.

Chances are you actually got a discount thanks to MS. And I don't mean a discount on the OS.

Places like Dell make money mostly on the more expensive hardware, upgrades, and support.

Below this (at the sub-1k level), you're getting a PC at marginal cost (and sometimes a loss), that gets monetized by Dell via desktop real-estate (all the crapware).

The Windows OS costs Dell about $40.


I loved it when Microsoft tried to buy Academia. We were in Cambridge and in the evening the bar keeper in one of the student buildings where we slept used to say: "Drink the most expensive stuff, Microsoft is paying for everything."

Didn't help though, I didn't work on MS technologies.


>The Microsoft Zune did not work out, Life, Bing and now Lumia are not working out as expected

I wonder if this spells the end of Nokia as well? That would be really very sad!


Why would it be sad to say goodbye to Nokia? Companies come and go and all of Nokia's problems today are of their own making. Sure they made some nice phones 6+ years ago but they could have easily of competed with Apple, hell Google managed to do it without even having a damn phone they just made the Android platform and worked with other companies to make the devices. Nokia should have embraced Android from day zero, if they had they would most likely be the number one Android phone supplier instead of Samsung.


Well, Google was better prepared to do it since their main source of income is not product sales but advertising. They can give Android away in order to lure eyeballs to the ads they serve.

To do the same Nokia should have changed their whole strategy, focus and expertise in less than 5 years, simply impossible for a company that size. Also worth noting, Google bought Android. It was not "complete" at time of acquisition but it wasn't a "lets begin from scratch" kind of project.

The problem with Nokia and Android is that Samsung will always, in every single case, have cheaper and more powerful devices. Maybe Nokia could've keep themselves in the game with a lot of marketing and a bit of luck, but eventually, down the road, Samsung would take over.

On top of that add that Google is getting in the hardware game and arguably the best Android devices will come from them. Even for Samsung the Android strategy might prove to be a bad idea in a couple of years.


> changed their whole strategy, focus and expertise in less than 5 years, simply impossible for a company that size

Microsoft was bigger than Nokia when, between 1993-2000, they executed several changes of greater magnitude in less than 5 years each (Windows 3, the response to Netscape, Windows NT).

> The problem with Nokia and Android is that Samsung will always, in every single case, have cheaper and more powerful devices. Maybe Nokia could've keep themselves in the game with a lot of marketing and a bit of luck, but eventually, down the road, Samsung would take over

Why? Samsung has only this year started showing small signs of becoming something more than a "fast follower". Nokia used to know how to lead the market... if they still did, they would have no trouble innovating to stay on top of Samsung.


Not to mention that, until things began to fall apart, Nokia sold plenty more phones than Samsung and had their own economies of scale to build on.


> Why would it be sad to say goodbye to Nokia? Companies come and go and all of Nokia's problems today are of their own making.

Well there are a lot of smart developers in Finland with a good design sense and the executive screwup at Nokia was no fault of theirs. It's not clear to me that there will be a big enough tech market to absorb them all. So there would probably be a net contraction of smart people doing cool stuff. To me, that's bad.

Also, more competition is always a good thing for the market.


Well, I'll miss Qt. Or at least the corporate muscle that used to fund it.


Qt will remain. Nokia don't want much to do with it now. That project might be better off without Nokia!


Did nokia absorb troll tech outright or are they an owning company?


Nah, it wouldn't be sad. Nokia gave us 300 babies before it died. Check out all these start-ups! http://www.zdnet.com/inside-nokia-bridge-how-nokia-funds-ex-...


Given how MS effectively osborned Nokia's flagship Lumia series by refusing to upgrade it to Windows 8, Nokia has no credibility left.

(Note: I don't own a Lumia, and I'd be wary now)

Phone contract runs for up to three years, and people who paid for the top-of-the-line phone are going to feel regret every time they make a call for the next three years. From a reputational standpoint, Elop has burned his platform another time.


Does this really matter? Hardly anyone bought the Lumia. For a device with practically zero traction, it makes sense for Microsoft to rapidly iterate the product until it's something consumers want (I don't think Windows Phone 8 will do that but "hang on to the paltry few Lumia customers we have now" should be priority #52495394 for Microsoft right now).


It isn't bad for Microsoft. It is bad for Nokia. The customers who are prepared to spend top money with a brand obviously has some affinity for it. These are the people a company needs when it goes through difficult times. The last thing a company should do is to alienate their best customers.


Your post just reminded me that a strategy will not work forever. Competitors and the market adjust around it to restore balance. I guess the same goes with companies as it does with nature, evolve or die.


Counter-examples aplenty.. Ma Bell begets today's AT&T/Verizon duopoly. Standard Oil begets 7 of the world's largest companies after Apple.


Give it time. This too shall pass.


So what? In the long run, we're all dead. Eventually, protons will decay.

"The market" doesn't do things. Saying that the market will take care of something is like saying the internet will take care of something; it requires a willful ignorance of the details.

Markets are human constructs designed to achieve particular ends. They have known failure modes and monopoly is one of them. There is no reason we need to sit around waiting for a monopoly to self-destruct, paying monopoly rents and having progress stifled in the meantime.


Yup, Standard Oil is coming back and so is Mother Bell.


Nah, Standard Oil isn't coming back. There are so many logistical nightmares and legal problems with merging two major oil firms that they won't want to repeat the process they went through ten years ago, nor will smaller firms be willing to buy the parts the DoJ forces the big guys to spin off. Just look at how Valero screwed itself by purchasing a good chunk of Exxon's California assets.

I don't think we'll see the domestic players merging but rather an increase in international joint ventures that effectively constitute a merger. Petrobras and Shell, TNK-BP and so forth.


So you think 300 years from now Ma Bell is still going to be around? Had I said my statement "This too shall pass" & "No strategy works forever" back in the 90s you guys would have said "Look at Microsoft, it's growing and growing".

Again, no strategy works forever, they work for varying lengths of time.


i'm just getting to that chapter about Standard Oil and its competitors in The Prize...


Sensationalist title much?

From TFA: "Analysts were expecting a $5.3 billion profit for the quarter, but that was canceled out by an even bigger loss on a five-year-old acquisition."

No, analysts were not expecting a $5.3B profit before the report; if they were they should probably not be in their jobs anymore. The after-hours price of MSFT shows that this news was already priced in and the loss was actually smaller that what was expected.

Geez.


With these kind of common-sense oversights, I often wonder if many web reporters actually read the shit they shovel out.


Web reporting has very much become first-to-market, so I doubt it.


A bit sensationalist but it's also pretty darn remarkable. It's never happened before


I wonder why MS decided to take the $6B write-down at this moment (from a 5 year old "investment") to engineer the report as a "loss"?


Probably a mix of accounting rules and wanting to do it before Win8 launches.


Agreed about the sensationalist title. Most people didn't watch the earnings call or read the article. With the huge write down it was more than expected some loss. People are just eager to comment without knowing.


How the hell is a factual title "sensationalist"?

Please, enlighten me.


The title misleads by emphasizing a particular fact, chosen for sounding dramatic, without context that would put that fact into perspective.


There was one thing I noticed from the report.

Windows and Windows live revenues were down. There is a footnote which that this includes a reduction for deferred income due to rebate programs, but even if you add that back in, Windows revenue is still down.

However, it gets stranger. Windows revenue + unearned income is higher than it was a year ago, though not by much compared to other business units. So it is very hard to say what it actually means.


yea. From further down the page on HN: "Microsoft expected to post first quarterly loss".


Say what you will about MS, but compared to Apple, Google, Oracle, or most other software companies, MS treats it's developers like gods.

I can not think of any other company that pays so much attention to it's developer community. I know, many around here may not have experience with as an MSDN member, but I do.

And trust me, having to deal with the likes of Apple AND Google, I miss MS' developer programs terribly.


And, yet, you seem to be talking about developing for them in the past tense.

There's a reason why Apple and Google are dominant now, and it's not just marketing, luck and timing. They've built fertile marketplaces that (especially) independent developers can leverage to create cottage industries if not empires, instead of simply make a living doing VBA and VC++ CRUD applications.

Oh, XNA and C# may be truly saner to handle than Cocoa and Java, but who truly gives a damn when you can't keep the lights on with your .exe file on Windows.




An unusual example. But noted.

Want me to link to the "thousands" of disgruntled articles about Apple's or Oracles' developer relations?

I left out Google, cause they do a hell of a better job in that department than Apple does.

Look I know I'm bashing Apple and Oracle. Cause right now, those are the platforms what I'm working in. But I've been an Apple fan boy for years. Ever since my first Power Macintosh (back in the day). And Apple has never had good relations with it's developers. But today it's the worse I've ever seen.

But not like most of have a choice. We write for where the masses are. And right now, Apple is everywhere and in my case, Oracle too. I just wish, sometimes they'd (Apple mostly) remember what it was like when they were starving. ;)


Sure, although primarily down to a gigantic $6.2bn writedown instead of any crash in Microsoft's overall fortunes. Best to take a bath now and miss the mark big style on an otherwise lacklustre quarter and then proclaim the Windows 8 revenue quarter later in the year as a bounce back.


Microsoft has one of its best quarters ever -- revenue is up and growing on all their major devisions -- but end up taking an accounting loss (and tax credit, I assume?). Kudos to the accounting team for that one!


It was intentional. They used a good quarter to shoulder the write down of a acquisition. The accountant/lawyers know what they're doing.


Just because you know you're going to suffer a huge loss doesn't justify the loss itself.


I didn't qualify it as I'm not a MS investor. I'll leave it up to the shareholders to read into it what they will.

This is fairly standard practice. Just much more noticeable when it is MS and it is such a large purchase price.


How does Steve Ballmer still have a job? I don't think that you could find a less inspirational, more pointy-haired boss tech executive.

Microsoft needs another visionary at the helm, or it will never make a comeback.


And before someone comes with the "but microsoft doubled its share values during Ballmer". The argument here is that, with microsoft's dominant incumbent position, a monkey would have tripled it.


Where can I get such a monkey?


Carly Fiorina. She did the same thing to HP, very differently. Cut quality. Cut R&D. Cut support. Cut service. Slightly lower prices, while your reputation is still sky-high. Outsource anything that can be done cheaper not in-house. Scale back benefits and anything that costs money. Have layoffs anywhere that doesn't produce short-term revenue.

Profits soar. Share prices soar. A few years later, as reputation catches up with quality and support, as there are no new products in the R&D pipeline, and as you have no core competencies, and as your best employees leave, the company tanks.

You walk of with a ton of cash from early-year bonuses.


HP's reputation was also destroyed over that time period. We and many other companies we worked with switch to Dell during Fiorina's tenure.


Any MBA program


Ah, finally - MBA getting some credit on HN ;).

Monkey that triples shareholder value in a multi-billion dollar company? I'll take two please.


Look in the corner offices of most other leading tech companies on the Fortune 500, who outperformed MSFT over the same period.


You, me, anyone really.


Just out of curiosity, how would you have tripled Microsoft's "share value"?


The company was in bad time, now the scene look much better. With windows 7 a success and all the enterprise growth, with Xbox and windows 8, they are in a much better position. Although I am not nearly qualified enough to comment on Balmer's performance as a multi-billion dollar company's CEO, but he seems to do fine. Bill Gates set the bar high for Steve, and weather Steve under-performed or not remains a matter of speculation.


Doing fine?

The MS share price has underperformed both the NASDAQ and the Dow Jones since he took over and a company that had never posted a loss now has.

The Xbox has lost money over all time (if you include initial costs), the Zune failed, Windows 8 is yet to be released. Despite massive investment last time I checked their on-line services division (give or take 400 million users) still lost money.

And they've gone from being the tech company you couldn't ignore to one that you can.

The only reason it looks fine is that Windows and Office keep bringing home the bacon but with the declining PC market (except Macs) and the rise of the smartphone and tablet markets (in which MS are currently, roughly, nowhere), how long will that be for?


Where did you get the data to say that Xbox had lost money?

Did you include royalties from each title and dev kits? I just would like to remind you that the only company in the game industry who make money with hardware is Nintendo. All other ones lose money on hardware and recover those loses from titles sells.

If you do have the support for saying that Xbox has lost money I will be very interested on reading that :)


The original Xbox launched in 2001 and the business unit lost money consistently until it's first profitable year in FY 2007/8 [1]. This is the business unit remember so includes all income including royalties from games and so on.

The same article also mentions that the year before the unit lost $1.9bn (the red ring of death issues hitting it hard).

You'd have hoped that once it turned profit it would have been upwards from there but while it remained profitable in 2009, the figures dropped 66% to a $169m [2]. In 2010 profits were up to $618m and then in 2011 $1.32bn which is obviously great but even if you add those four profitable years together you're only $500m or so over the loss from 2007.

Against that you've got all the development costs in the run up to the launch of the 360 in 2005 and the entire loss making life of the original Xbox (launched 2001 but would have been running up development costs for a couple of years before that at least).

The success recently and the launch of Kinnect will have likely increased it's profitability since 2011, but while I don't have links (though I have gone through it before, I just don't have the time now) I don't believe it's come close to wiping out those original losses.

[1] http://kotaku.com/5026559/xbox-division-finally-reports-prof... [2] http://kotaku.com/5321559/xbox-division-sees-66-percent-slid...


I love Steve Ballmer and I'm not alone.


I am sure Steve Ballmer also loves Steve Ballmer.


Windows windows on the wall...


I can't help but feel that they are leveling the books on any bad or potentual bad area's and might even put all the Win8 production costs into that quarter as well. Motivation being that you have win8 and other goodies comming out and your now in a more comfortable position to imply look the news windows 8 must be good as we have not made a lose this time. That is nomater how well sales actualy go. I suspect the upgrade price is tempting for people to try dual booting it as a alternative to there current flavour of windows choice and trying it out. But clearing out any damaging impact onto the accounts and bunderling them into one bad month prior to your new OS will only help make the new OS seem better that it may or may not be. This and cheap upgrade price I suspect I can see how the next quarter goes and how that can only help promote windows 8 at a share level as apposed to user level. Which they cater for with a cheap upgrade price. Also better to get a bad period out of the way now before RIM falls as the bad market internet will suddenly all turn onto Microsoft as its next target to say is doomed. Sad how markets work nowadays.


Putting aside Microsoft's current financial performance, and the fact they still have stockpiles of cash in the bank, I think they are doomed. It might take them 20 more years to fail, but unless they radically change, they will fail.

In the last few months I had a chance to meet some folks from Google, Facebook, Apple and Microsoft. Some are my friends and some I've only met a few times. The first three companies seemed to have retained a ton of engineers that are hard working, driven, passionate about their products and their field. Meanwhile, I only met 1 person at Microsoft who truly was excited about being at MS. Everyone else, who was passionate, left MS either a few years ago or just recently.

You may think that my sample size is too small, but I tend to trust the gut feeling. What saw at MS was a company full of good people, but no one in particular cared about the success of the company. They were all there because it was a good job, a stable pay check, maybe even an educational experience. Meanwhile, folks I got to talk to at Google and Facebook and particularly at Apple were all committed to the cause, hungry to outsmart and outdo their competition. I think that speaks to the company culture and culture speaks to success.

All said, I think MS is doomed because they got too comfortable, too used to the easy money. Microsoft is really good at piloting a massive ship that slowly and steadily moves through the deep waters. But, as the waters are drying, they may just get stuck. To continue prospering, Microsoft needs to innovate, to reinvent themselves, to be agile again. They may get lucky and acquired the next big thing, which will bring them prosperity for years to come, but they may not and if they don't, they will be toast at the current state of affairs.

Lastly, this is a lesson to all of us. If you want your company to succeed, you cannot get comfortable. Like Steve Jobs said in his biography, you have to cannibalize yourself or your competition will do it for you. Your and your company has to keep running the marathon as if you have just started the journey.

Agree with me, disagree with me, bash me for not believing in Microsoft, that's okay. All I know, I will be sure to run this marathon fast and smart and I won't let my company to slow down and get on the death spiral. Come, run along, we'll have a good time.


> Microsoft needs to innovate, to reinvent themselves, to be agile again

But MS was never particularly innovative. Seriously, how many significant innovations did they come up with?

> All I know, I will be sure to run this marathon fast and smart and I won't let my company to slow down and get on the death spiral.

:-)


2 take aways from this:

1> Microsoft continues to place big bets on markets which matter. It is not sitting on fancy profits. 2> It has a terrible management team.


I'm more curious about the timing of the write-down. Are they taking the write-down now, in an attempt to put the Microsoft of the last decade to rest as they prepare for the new Windows 8 lines?

How does company marketing influence these decisions?

Was their a financial reason to take the write-down in one large chunk? Or within a certain timeframe?


Technically accurate, but the headline is misleading. The loss was because of a non-cash write-off of a transaction made a few years ago (2007-aQuantive).

Microsoft's core businesses, especially Office, are humming along. The franchise is pretty strong and the overall company is a cash generating beast.


Discussion earlier today with 75 comments: http://news.ycombinator.com/item?id=4266155


It wasn't an operating loss -- it was a writeoff of a bad investment. They took the loss right now, but their cash position didn't change. Just, their reported income and taxes due got lower.

Still significant a bit, but much less than an operating loss instead of a writeoff would've been.


Hard to say what this means.

Revenue is up on the whole except Windows, where it is down slightly even before the deferral.

Expenses are up much more, resulting in the loss. It isn't clear what they are spending on though.

Moreover cash income is up. Even Windows grew when you add revenue to unearned cash.

This tells me some interesting things:

* Orders are up, fulfillment is up everywhere except Windows where orders are up and fulfilment is down even before adding in the deferral.

* Microsoft's spending us significantly up.


that just goes to show that quarterly accounting is basically a flawed metric


I just wanted to add a few more words to this from my experience with working at Microsoft and why I think people should seriously calm down more on Microsoft. http://mittermayr.tumblr.com/post/27582543470/microsoft-the-...



Steve Jobs said it best. They just don't have any taste and in a world where people will pay a premium where taste has been considered when products are being developed (apple, tesla, etc), companies like MS will be left in the dust.


Does taste mean not being able to understand what the aQuantive writedown is about?

Also, a mass produced phone built in China and sold in Walmart is a lot of things, but tasteful it is not.


Does taste mean not being able to understand what the aQuantive writedown is about?

Excellent point...

Also, a mass produced phone built in China and sold in Walmart is a lot of things, but tasteful it is not.

... terrible point!


Wouldn't have happened had they not wasted 6 billion on aQuantive trying to buy their way into search. Google paddled that bottom.


buy their way into ads you mean. They bought their way into search via the Yahoo deal. and of course Google bought their way into search by paying firefox and others who distributed the google toolbar... everybody tries to do it I guess


> Google bought their way into search by paying firefox and others who distributed the google toolbar.

Google already owned search when firefox finally had nontrivial market share. They did not "buy their way into search", the transformed the market with an excellent product (Google altavista, the undisputed king until Google came).

At some point, they started paying e.g. mozilla to maintain their position.

But they reached that position based on merit. (A rather uncommon event, unfortunately).


"They bought their way into search via the Yahoo deal."

That has only really bore fruit in the US though. MS have less than 5 percent share of search worldwide.

"Google bought their way into search by paying firefox"

Google actually had a larger share of the search market prior to the Firefox deal.


Funny how Eric Schmidt thinks Bing is a huge threat to Google. The corporate spin at the hearings is just too ironic.

http://cnnmoneytech.tumblr.com/post/10483503055/eric-schmidt...


Reminds me of Microsoft's investment in Apple in 1997...

"There was some suggestion that Mr Gates may be anxious to keep Apple afloat to forestall a scenario where, following an Apple demise, a virtual monopoly hold by Microsoft on the software market would inevitably attract negative attention from fair competition regulators in Washington."

http://www.independent.co.uk/news/business/apple-grabs-150m-...


Apple should invest something back into Microsoft to get them to make Office 2013 for the Mac.


Well, an update to Office 2011 for Mac is being released to add skydrive integration. There are also rumors of iOS and Android versions that will be released, but I guess we'll have to wait and see what actually happens.


The irony here is that their rescue seems to have worked out a bit too well.


It wasn't a "rescue" it was a lawsuit settlement: http://en.wikipedia.org/wiki/San_Francisco_Canyon_Company


The biggest danger for a company the size of Google or Microsoft is complacency. Bing may indeed be a big threat to Google in the long run.


It's just like how Ballmer came out recently railing about how no stone would be left unturned competing with Apple and how MS responded to Linux in the early netbook era. For a global tech company these days you cede nothing. No matter how insignificant Bing may be compared to Google in actuality that doesn't mean Google can afford to go to sleep for a second and they won't.


Have you considered the possibility that Schmidt the man actually believes that Bing is competitive with Google and sees this as something to rally against? How is that lying* and spinning? I would consider an executive to be remiss to arrogantly assume that their product is better no matter what. The fact that Schmidt isn't slamming the Bing effort and is actually offering praise should be seen as a good thing. Which CEO was it that laughed at the iPhone when it was released? You seem to be consumed by hate.

*recoiledsnake originally had the word "lying" in his comment. I just noticed he edited that out.


the possibility that Schmidt the man actually believes that Bing is competitive with Google

From a results-based perspective, it more-or-less is. But actually capturing the market is hard to imagine. Search engines in general seem to be reaching the limits of filtering 5 billion pages based on 2 or 3 word queries.


Exactly. Never fully trust the public statements of a corporate exec – they're often smart enough (or stupid enough) to try to be manipulative, either internally or externally and public statements can play both of those sides.


And the stock is actually up after hours. Go figure.

Edit:

"The server and tools unit delivered fourth quarter revenue growth of 13 percent and the business division, which features Office, was up 7 percent. Microsoft's entertainment and device division saw revenue jump 20 percent largely because it now includes Skype."


So they took a big chargeoff on an old mistake so they didn't have to pay taxes on a great quarter? That's what it looks like to me, anyway.


GAAP earnings are not necessarily the same as earnings for taxes. IANA tax lawyer, but I don't think you get a tax break on the write down unless you shut down the acquired business entirely. Otherwise it would be too easy to game your taxes simply by declaring these kinds of goodwill write downs.


If stocks moved up when earnings were good and down when earnings were bad, it would be pretty trivial to game the system and double your money every month or so. The reason is that quarterly earnings are not that hard to predict - everyone knew well in advance that Microsoft was going to report a loss this quarter, for example. What they didn't know is exactly how much it was going to be, so they bought and sold based on their best estimates. It turns out this quarter they estimated that the earnings were going to be a little worse than they actually were, so the price corrected itself when the real amount was announced.


Investors are not stupid, they have their own discounts or stock targets in mind. The price of a stock will always adjust one way or the other depending on new information; "not as bad as I thought" or "not as good as I hoped" can cause stock rise on negative results and stock falls on positive results. If you want to game the system, you need to commit fraud and inject misleading information into the system, I hear this happens quite often.


[deleted]


It's 2.5%, not sure where you're seeing 0.71. Maybe you saw the dollar increase and mistook it for the % increase?

And how is GOOG relevant here? Did they announce a big writedown? Also, GOOG is down about 12% this yea while MSFT is up 18%.


Finally it is clear that Apple's record profit is at Microsoft's expense.

Note that some major acquisition costs are responsible for the loss this quarter. Also given the right moves Microsoft seems to be making (for e.g. Surface announcement and Low pricing of the Windows 8 upgrades), it will be interesting to see what direction it takes from here onwards.


This loss is b/c of the aQuantive write down. This loss has nothing to do with Apple (not to say Apple's success isn't influencing what Microsoft is doing.)

From article: "Earlier this month, the company said it was taking a one-time charge of $6.2 billion, almost exactly the amount it paid for aQuantive, an online advertising company it bought in 2007 for $6.3 billion."


Microsoft had record breaking revenues for this quarter. I doubt Apple's record profit had little do with anything in the world of Microsoft.


> Finally it is clear that Apple's record profit is at Microsoft's expense.

this is not clear to me at all


Given the number of people I know who use iTunes on windows and have greif so think about getting a Mac instead is only equaled by the number of people who do music and saw apple buy up the good players software and make the mac the more robust platform.

But I bet Office runs better under windows than it does under osx, its the way - code bitching, just hate it.


Dunno. I prefer Office on OS X, seems so much faster and easier to use. But that's just me.


MS Office runs well under Mac, and some people I know actually prefer the OS X version.




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