Microsoft Posts Record Earnings 528
sriram_2001 writes "Microsoft has just had a record quarter where their profits have doubled from the previous quarter. Total sales are at $10 billion, exceeding both internal and external expectations. Microsoft has attributed the rise in earnings to increased server sales (where *nix-based systems are supposed to be doing well) and more XBox units being sold. For a company that most Slashdotters would say is on the decline, Microsoft sure has weird financial results!" To put it in perspective, Microsoft's income is about the same as New York State receives in taxes - below California, and well above the other 48 states.
Grin, borg, grin (Score:5, Funny)
Gates' political leanings? (Score:2, Interesting)
Re:Gates' political leanings? (Score:3, Funny)
SEC Confirms It (Score:2, Redundant)
What, you say? (Score:2)
Re:Grin, borg, grin (Score:5, Interesting)
First Post? (Score:4, Funny)
Re:First Post? (Score:5, Insightful)
That many people still see that you have to use Microsoft Products or that alternatives aren't out there for certain products that are easy for your average joe 6 pack to use.
Alternatives are targeted at the tech savvy and are not marketed well enough. M$ is a marketing machine. Most of our folks have trouble programming a VCR clock. I bet it's very true.
Re:First Post? (Score:5, Informative)
I can't find the actual data of this quarter, but here are the data [nasdaq.com] for the last four quarters. Notice that the quarter ending 12/31/2003 is the one used for comparison by the article.
-quarter ending 12/31/2003:
revenue $10,153,000, net income $1,549,000
-quarter ending 9/30/2004:
revenue $9,189,000, net income $2,528,000.
How can they have a billion less in revenue and a billion more in income?
The answer is also there: they spent $1.4 BILLION *less* in Research and Development.
Microsoft is of course still in a dominant position, and their software still sells like no other piece of software ever did, but the real advancement from last year is a +6% in revenue (which is propably *less* than the overall market growth).
Re:First Post? (Score:3, Interesting)
Cost cutting (Score:5, Interesting)
Otherwise, it would seem like an artifact of accounting (revenue posted one quarter but not earned until this quarter, etc).
Re: Linux not yet good enough! (Score:2, Insightful)
However, the server component does indicate that
the lock-in aspect is incredibly important. This indicates that even for supposedly "Tech-savy" users, M$ produces a product that many view as good enough.
For those who believe that M$ profits need to begin to shrink to enhance world freedom, what this means is that 1) Linux has to get relatively much better at a technical lev
Re:First Post? (Score:3, Funny)
Maybe the numbers show that there is no competition and that MS is indeed a monopoly that should be broken up.
Maybe the numbers show that MS is cutting R&D like crazy.
Maybe the numbers show that accountants need to have fun too.
Re:First Post? (Score:3, Funny)
No matter ... (Score:4, Funny)
Re:No matter ... (Score:2, Funny)
Re:No matter ... (Score:4, Funny)
Re:No matter ... (Score:3, Insightful)
Server Sales are rising everywhere (Score:5, Informative)
Hewlett-Packard: +21%
Dell: +28%
IBM: +36%
(Gartner quote)
http://www.itfacts.biz/index.php?id=P243 [itfacts.biz]
There have to be quite a couple of linux- and other boxes, if Microsoft ist just +18%.
Anybody got more precise infos on actual sales of iron?
btw: Profits are also significantly up because of the cut in personell.
Details on different aspects of server sales: http://www.itfacts.biz/index.php?id=C0_5_1 [itfacts.biz]
Maybe it's because ... (Score:2, Insightful)
Re:Maybe it's because ... (Score:2)
Re:Maybe it's because ... (Score:4, Interesting)
Re:Server Sales are rising everywhere (Score:3, Informative)
Re:Server Sales are rising everywhere (Score:2)
Can't align those statistics that way. (Score:4, Interesting)
While there may be an increase in Linux deployments, you can't infer that from any of this information.
This morning on Bloomberg News they specifically called out Halo 2 as being a very large contributor to the suprising jump in sales, as a large number of people (myself included) bought an X-Box specifically for Halo.
The dual facts that the XBox is the first modern console I've ever bought and that I've since bought ten other games is icing on the cake for them. There are a lot of people being pulled into modern consoles who were never tempted before by them.
Re:Server Sales are rising everywhere (Score:4, Funny)
Even Apple is catching this wave:
Xserve sales up 119% in third 1/4 '04 [macworld.com], trend likely to continue.
In other news... (Score:3, Funny)
Server sales (Score:5, Insightful)
Maybe it's because more servers (both MS and !MS) have been sold this year so both were profitable...
Ironic. (Score:3, Interesting)
Re:Ironic. (Score:2)
How cute and funny this may be I still think business should make a business decision
Re:Ironic. (Score:2)
A technical review of something has never been much of a strength of mine - I think its time they pulled it
Wow (Score:5, Funny)
Correctiion: (Score:3, Funny)
2. Profit
3. Profit
4. Profit!
(I'd write more, except that that Clippy keeps popping up saying "You appear to be writing a Microsoft business history. Do you want any help?"
Re:Correctiion: (Score:5, Funny)
2. Less Developers
3. Less Developers more Marketeers
4. More Marketeers, More Lawyers, Less Developers
5. Profit
Good for them (Score:2, Insightful)
This is probably one reason why Microsoft is increasing office space (a good hint at increased hiring if they're making room for thousands of extra workers).
When will people stop wishing for the failure of others and start wishing for the success of their choosing?
Re:Good for them (Score:2)
There is pleanty of room for profit all around. Success in one area doesn't need hurt the other. If you look at the current year 2005 and some simple math you see it has been 5 years sience the year 2000 and many of these server were last upgraded 1999 for Windows 2000. So these servers were getting old and needed to be replace. Sure some went to Linux and other Went to Apple but most of them just upgraded to another windows server. Market share is the percentage of the piece of the pie. Prof
Historically, not that great though (Score:3, Insightful)
Re:Historically, not that great though (Score:5, Insightful)
Re:Historically, not that great though (Score:3, Interesting)
A 1 man outfit hiring 2 others is a 300% growth.
Re:Historically, not that great though (Score:2)
No, that's only 200% growth. The outfit is 300% larger than it's original size, but don't forget that it started at 100%.
Good point though.
Re:Historically, not that great though (Score:2)
Yes, and the MBA farm told us that if we're not growing as fast as we were last quarter, we're dying! Insert lame netcraft 'joke'.
I'd say its also safe to say that the days of explosive growth (as in early to mid 90's) are behind them.
Really? The tech boom is over? No shit!
New York's Income (Score:2, Funny)
I don't understand how much money that is! (Score:2, Funny)
shhhh! (Score:2)
That's nice... (Score:5, Interesting)
What I'd like to see is a comparison of growth rates of major software companies. Even if Microsoft still comes out on top, at least the comparison would be relative to _something_.
Re:That's nice... (Score:2, Insightful)
The increase in server sales is probably sustainable because servers are being deployed in environments where they used not to exist. For example, small businesses used to shut down all the PCs for the nigth. Now they run their own web servers or email and file servers for remote access. I guess it is the broadband Internet connections that make the difference. You fi
licence fees (Score:3, Insightful)
Re:licence fees (Score:2)
Basically the license let us be "clean" on licensing in the event of an audit. The blanket license keeps us from ever having to prove that every piece of software is properly licensed. The overwhelming majority of the software on university-owned machines IS above-board, but finding the paperwork to pro
Re:licence fees (Score:2)
Rise in server sales (Score:2)
is everyone up? Apple is too..... (Score:5, Interesting)
http://www.apple.com/pr/library/2005/jan/12result
Predictions? (Score:2)
Re:Predictions? (Score:3, Insightful)
I think its just a "star". The reason we're talking about it is because it was a "small moon" 20 years ago, so its growth has been stunning.
But now its another company. Its earnings are good, but not wonderful. Its products are good, but not wonderful. Its growth is good, but not wonderful. (So the black-hole / supernova thing probably doesn't apply). What it does have insane amounts of is cash. So its also not a star that's going to run out of fuel any time soon.
No SWE's on debugging (Score:2, Funny)
One Time Boost (Score:5, Insightful)
It should also be said, that there's no Halo next quarter.
MSFT would love to make the claim that this is largely due to server software... but its Halo II... and that ain't happening again any time soon.
Re:One Time Boost (Score:4, Interesting)
It's probably sold close to 7 million copies now. Add in an average of $10 worth of accessories to each sale (some people buy a new controller or two, but most buy nothing else).
So, you have (Halo 2 ($50) + $10 accessories) * 7 million = $420 million, roughly $300 million of which is profit. Plus all the new Xbox live account, which is probably pulling in a couple million in profit per month.
Nice bump from Halo 2, but it's clearly not enough to double their profit from the previous quarter.
Also, sales of new xboxes don't count, since this is profit, not revenue.
Re:One Time Boost (Score:2)
http://www.usatoday.com/printedition/life/2004112
Just something I saw a couple days ago.
Re:One Time Boost (Score:2)
So, the profit number is closer to $500 or $600 million. And still wouldn't account for the huge increase in overall MS profits (although it still helps some).
Re:One Time Boost (Score:5, Insightful)
Halo 2 has sold 6 million units at 50 dollars each. If you count wholesale againt "total sales" figures, that adds 180 million dollars. Considering Microsoft reaps publisher, producer, and licencing margins on each one sold, Halo 2 accounts for *all* 90 million in profit the Microsoft games division made last quarter.
Still, that's nothing compared to the 2.5 billion in profit from their desktop division.
Unix migrations (Score:4, Insightful)
Re:Unix migrations (Score:3, Insightful)
From where I'm sitting, this isn't true. Over the past four years, I've seen more and more proprietary hardware being replaced by commodity hardware. This is happening for various 'nix strongholds - from servers to engineering workstations. And while many folks will view this as a Windows vs. Unix issue... it's not. It's all about the hardware. The commod
Where is all the money coming from? (Score:3, Interesting)
Even during the most difficult of economic times, Microsoft has made billions.
Even when tech companies are in a slump, and businesses fold left and right, MS continues to rake in the dough.
So where does this money come from?
"IT CAME FROM YOU!" said the presenter.
Yes, while your companies are struggling to make a penny or two, MS just leeches off of you with their Windows licenses and forced upgrades. Face it, you get little in return for every new version of Windows you buy. Win2K->WinXP was just a hideous facelift.
Yet people still pay through the nose for Windows. It's inexplicable.
Re:Where is all the money coming from? (Score:3, Insightful)
It's not inexplicable... Microsoft started out by squashing competition in every arena they could until they were above and beyond the most dominant force in the computer industry.
They received a slap on the wrist from the Government and continue to dominate...
The reason that people continue to go with upgrades and new versions of software like Office is because they don't have a choice. If you want to interoperate in the business wo
Re:Where is all the money coming from? (Score:2)
There are many good replacements for MS business products today. (not home products) Not all of them are free/OpenSourced but they are non-MS.
Its really at a point today that if you are locked in to MS, its because you made the decision, not because of illegal activity by MS.
Re:Where is all the money coming from? (Score:4, Insightful)
Regardless of the existence of acceptable replacements, there is still a belief by senior management that Microsoft is like the government: you avoid giving them as much money as you can get away with but sooner or later you have to pay them. It's literally factored in as part of the rules if you want to be in the game.
Now, the good news is the times, they are a changin'...
Re:Where is all the money coming from? (Score:2, Insightful)
Stop propagating that meme. [microsoft.com]
I'm no MS fanboy [openvms.org], but repeating misinformation won't get you anywhere. Besides, someone who is actually in IT will tell you that most of the OS money is spent on server licenses and CALs, and the difference between 2000 Server and 2003 Server is even bigger than that between the desktop versions. A fancy UI doesn't get you far on a server (and it's turned
Re:Where is all the money coming from? (Score:2, Insightful)
"Oh my god, my company has to buy new fleet vehicles every couple years because the old ones just aren't as good anymore! GM's just one big organized crime syndicate!"
Re:Where is all the money coming from? (Score:2)
A perfectly serviceable version of office 97 is essentially non-funcioning if the people you interoperate with use a newer version of office. This isn't because it is impossible to exchange information between most versions, but because for the average office drone the concept of saving in a reverse compatible format is to much of a hassel. Not to mention M$ seems to
Xbox sales boost profits? (Score:2)
Re:Xbox sales boost profits? (Score:5, Interesting)
Most console hardware is only a loss leader at launch - eventually, they will get cheaper to produce, as the price of components goes down. Look at the cost of processors - you can get a Pentium 3 800 Mhz at Fry's for what, $20, if even that now? Look at Hard Drive prices - can you even find an 8 GB Hard drive on a shelf? Even if you could, what would you pay for it?
And you have to figure that MS is buying bulk, and is getting an even cheaper price. So, yes, I would image right now XBox hardware sales are giving MS profit.
And as far as Halo 2 goes... even if it comes out for the PC, I won't be buying it. Nor will I buy Age of Empires 3. (No, I will not pirate them either - I'm just not interested in owning or playing any Microsoft product.)
Besides - Burnout 3 is also a helluva lot of fun on my PS2.
the microsoft tax (Score:2, Troll)
I stopped paying the microsoft tax last year when I bought my first Mac.
Re:the microsoft tax (Score:3, Funny)
And you started paying the Apple Tax.
What you just said is like this: "I stopped paying NY state taxes last year when I moved to NJ."
Growth Rate (Score:3, Interesting)
You have to keep in mind that it really will get harder and harder to maintain high growth rates. Multi-million dollar markets are not big enough for M$ now. They will only enter larger (billion dollar) markets. Furthermore, without market and sales growth, their stock price simply cannot grow at a high rate. Think "mature company" not "young, fast, growing company" from here going forward.
You will be assimilated (Score:2)
And in the news today, Bill Gates says:
"Come join our friendly community, we promise to tax you less then California, but in our wonderful community you get great programs to."
Microsoft has decided to cede from the union and create their own country.
The Register suggests.. (Score:5, Interesting)
Re:The Register suggests.. (Score:3, Funny)
Re: (Score:2)
Lower per-share compensation (Score:4, Informative)
Lying with statistics, MS style (Score:2)
They cook the books. (Score:5, Interesting)
One time I got a ride with someone from accounting. The conversation must have been started about how they posted record profits that day and he was all giddy about it. He went on about how they withhold money back in some financial quarts in order to show off record results in another. I'm sure this has become familiar with many people over the 90s that once or twice a year MS would post record profits. The sole purpose would be to drive up the price of the stock. I laughed and asked him if it were legal, he said that not only was it legal, but very common in the industry. What he was doing wasn't any different from what other companies did during the dot com explosion.
I haven't temped there in a while, im not sure how things are in the labs or meeting rooms. Everyone benefits from a higher stock price, but im thinking this may be to keep their talent from jumping ship. Back in the mid to late 90s, a program manger or developer could be expected to work there for 7 years, then cash in all their stock options and retire at the ripe old age of 30. Its obviously not like that now because the stock price is lower and has been like that for several years. Investors really aren't that worried about the stock price, they are in it for the long term investment. But not the workers! Oh no, they want to work that 7 years and get the hell out of dodge and its the stock options that really keeps a MS employee working there. I've heard it from a few developers that if it wasn't for the stock options, they would quit their jobs in a heartbeat.
Other questionable financial actions (Score:5, Interesting)
"According to an ABC News 1/22/99 article by Michael Martinez, Microsoft's own internal auditor, a respected 30 year veteran and former partner of Deloitte and Touche, was fired in 1996 after informing management that their earnings manipulations were illegal and violations of the SEC and FASB laws. He was given the option to resign or be fired and later settled for $4 million after suing under the Federal Whistle Blowers Act."
"The single most lucrative product Microsoft sells is its own stock. Microsoft receives almost as much cash inflow from the stock market as it does by selling goods and services... Basically, Microsoft receives cash by issuing employee stock options, after which the company then receives billions of dollars in tax deductions from the IRS for doing so. Add in the warrants it sells on its own stock, and the company made over $5 billion off the stock market [for the] fiscal year end[ing] July 1999, tax-free. For comparison, its after-tax net income was only $7.8 billion. Microsoft may not be much in the programming department, but its accountants are impressive." (Landley, Rob. "Why Microsoft's Stock Options Scare Me." The Motley Fool 17 Feb 2000)
Cheap Labor... (Score:2)
Microsoft in decline? Why? (Score:2, Interesting)
PCs and their operating systems are ubiquitous these days. They're not geek toys, they're tools for everyone. And except for the smallest
Re:Microsoft in decline? Why? (Score:3, Interesting)
Re:Microsoft in decline? Why? (Score:3, Interesting)
The average, non-technical person uses Windows because that is what came installed on their machine, along with some version of MS Office. If you look at the whole landscape, you'll notice that most people are really not dependent on MS for anything other than Windows and Office. In fact, you could even say that they are only dependent on Windows *because* of Office.
Beating MS has absolutely nothing to do wi
Decline? (Score:2)
They wont be declining/going away for at least another 20 years..
After that.. who knows..
On other news MS hired Enron's Creative... (Score:2)
Great, but stock still flat (Score:2, Informative)
Really? or Nominally? (Score:3, Informative)
"Weird financial results" (Score:5, Insightful)
In DEC's case, the influx of workstation-class machinery caused a weakening of the mini market. This weakening killed off all but the strongest mini maker (DEC). Customers fleeing from failing makers split themselves between DEC and the new workstation vendors, thus causing a boost in DEC's sales right before the crash of the whole mini market -- DEC peaked amongst the carnage of their market, then crashed spectacularly.
Sun's case was a repeat of the behavior. Sun's market had migrated from workstations to servers from the late 80s through the mid 90s. By the mid 90s, however, we were already seeing a market shift towards PCs acting as servers. As the server vendors' market weakened (still prior to the Internet boom) we saw diminishing workstation/server sales for many companies in that sector (e.g. HP, SGI). Meanwhile Sun's sales skyrocketed, again attributable to a split in the market where some of the people leaving failing vendors went to Sun.
Sun would have had a crash in the 1999 timeframe if it weren't for the internet boom, which dramatically increased demand for large servers. When the boom ended, however, so did Sun's fortunes -- very fast. You can see in Dell's sales where the market went.
Microsoft has been benefitting from the failing of the server vendors, same as Sun. (Though, really, the biggest winner in this is Dell.) If this were a normal hardware-only migration Microsoft would rapidly capture upwards of 80% of he market and be dominant until the next hardware shift. But it's not normal because this is the first transition where the software is decoupled from the hardware.
Microsoft should have won by default, with customers shifting from server-class systems to PCs as customers went with the default option of Windows servers. And, in fact, Microsoft did extremely well for the first several years of the transition when there really wasn't much competition in the PC space.
Linux has thrown a huge wrench in the works. It's maturing very nicely and offers the huge win over Windows in that it's both cheaper for licenses and especially for migration.
If there's any one thing we can count on in this industry it's that the cheapest thing that gets the job done wins (which I've been saying so long now I call it Jim's Law). Until Linux came along the cheapest thing was Windows servers. Now it's not. The market impact of that is going to be phenomenal.
In a typical market transition you can expect more or less equal boosting of the various competitors in the market as people flee dying companies. But in a typical market transition there is not much price difference between the competitors -- usually within 10%, as everyone attempts to maximize the market opportunity.
Linux turns that on its head by offering a scale of prices starting at zero (no support) through prices that are more or less competitive with Microsoft's offerings (full support). That gives Linux a significant market advantage.
I expect we'll see a major market move towards mid-priced systems (some support, not "enterprise class" support, call it the $500 price point). Microsoft is trying hard to push for higher prices in that market just as Linux is depressing them.
If things continue the way they are going I would expect Microsoft to peak in the next one to three years at perhaps 65% of the market (by units) as the migration from server-class systems to PCs-as-servers completes, and then fall over the following five years to about 30% of the market as people migrate to more cost-effective Linux solutions.
But Microsoft won't take this laying down, they'll start reducing prices to match those of the midrange Linux products (more on that in a minute), to whatever degree they can afford. As such I think we're going to see the products come very close to price parity and we'll see Windows stabilize at 40-45% market share with
Re:"Weird financial results" (Score:3, Insightful)
I agree with most of your analysis, but not with the above.
Windows marketshare will not stabilize at any percentage lower than 80% [of the PC-centric market (=x86 and AMD64), not the whole computing market] because Windows needs domination to be viable. The Linux community can write most drivers for hardware, Microsoft is dependent on hardware vendors to write drivers for Windows, they just can't do it themselves.
Similar effects with software
Comparison to tax revenue? (Score:5, Insightful)
Everyone who paid Microsoft a dime did so voluntarily, while people who paid the state of New York did so to stay out of jail.
Irrational Exuberance XP (Score:5, Informative)
Yeah. People were laughing at Alan Greenspan for a number of few years before that bubble burst too. I guess some of us silly Slashdotters just don't "get" the new Microsoft economy. It's ok though, you just go ahead now and keep putting your money there. After all, what could be wrong with Microsoft's accounting practices [billparish.com]?
Re:Old earnings? (Score:5, Interesting)
This isn't another episode of funny accounting is it?
It is of sorts. Microsoft has so much cash in various accounts is is commonly known in the past that not was all accounted for as to make their profits more reasonable. With a 80-90% markup in North American markets does not hurt either.
Y2K was 4-5 years ago, and alot of the sales are upgrades from NT to W2000 or W2003. 1999 was a bubble sales year and after 4-5 years write down many companies will upgrade servers. Sales for this type are Y2K cyclical and will not last.
And if you don't plow the income into R&D to fix issues of security, usability and reliability then it is like milking a cow without feeding it.
Novell had such a bubble near it's end at the top as did Digital and IBM before them. History is just repeating itself.
Re:Old earnings? (Score:4, Insightful)
There's one big difference. In each of those cases, Microsoft was there to burst the bubble and take away the market share. This time around there is no "other Microsoft".
Don't get me wrong, there's going to be competition. OSS continues to make strides in usability (Firefox), and Apple is finally selling a cheap computer. But I think, by best estimates, Apple/OSS could only take away 20% of MS's market share on the OS level.
When Novell collapsed, it was because Microsoft was rising. Same with IBM (fortunately for them, they reshaped their business from software to services). No one is going to grind Microsoft into the dirt anytime soon.
Re:Old earnings? (Score:5, Informative)
And if you have to upgrade the OS (which results in lots of application regression testing, which is labour and the most expensive cost of the whole process), you may as well replace the server which is probably 4-5 years old at this point. So the upswing in server sales for the last quarter or two I would attribute to this WinNT retirement. WinNT upgrade = license fees, + labour + h/w....ironically the catalyst is probably the least expensive component in the equation.
At least, that's how it played out at the bank I work at...
Re: (Score:2)
Comment removed (Score:4, Insightful)
Re: (Score:2)
Re:Unpleasant pattern emerging. (Score:3, Interesting)