Microsoft results: reason to rejoice - and worry

Sam Varghese
Monday, 01 November 2010 12:06

IT Industry - Market

Microsoft's first quarter results, announced last week, are a mixed bag - the company has reason to rejoice because of a rise in profit at a time when the US economy is not in the best of health.

Revenues were $US16.20 billion and profit $US5.41 billion, based largely on sales of new licences for Windows 7

"Prior year results reflect the deferral of $1.47 billion of revenue, an impact of $0.12 of diluted earnings per share, relating to the Windows 7 Upgrade Option program (sic) and sales of Windows 7 to OEMs and retailers before general availability in October 2009," the company said in a media release.

But there is reason for worry too. Most of the profit comes from its PC market - sales of Windows 7 and Office 2010 - the one sector that is rapidly becoming part of the "old" tech economy as users move away to other devices as their main computing platform.

While Microsoft's search engine Bing showed growth, this was at the expense of Yahoo! with which it has a partnership. No ground was made on overhauling the 800-lb gorilla - Google.

And the company's online services division continued to bleed, recording a $US560 million loss for the quarter. Last quarter, the same division lost $US477 million.

It is too early to judge whether Microsoft's efforts in the mobile market are bearing fruit - its Windows 7 for mobiles was released with much fanfare only recently.

The earnings from the take-up of Windows 7 must be balanced against the enormous losses - both of face and profits - caused by the Vista debacle.