While, the numbers are fantastic by most standards,
Microsoft's profit did fall by 28%. They may sell the
hell out of XBOXs (I own a 360), they are still losing
massive amounts of money on them.
The Entertainment and Devices Division lost
$289 million in the just announced quarter.
What's really amazing? The Client Division (OS) and
Microsoft Business Division (Office mainly) accounted
for over $6 billion in revenue. An absolutely amazing
$4 billion in profit. That is one hell of a profit margin.
https://www.microsoft.com/msft/earnings/FY07/earn_rel_q2_07.mspx
http://money.cnn.com/news/newsfeeds/articles/djf500/200701251632DOWJONESDJONLINE001188_FORTUNE5.htm
SAN FRANCISCO (Dow Jones) - Microsoft Corp. late Thursday reported a 28% drop in quarterly
profit as the world's largest software company was hurt by the delayed release of Vista, the
newest version of its flagship Windows program.
Microsoft (MSFT) said it earned $2.63 billion, or 26 cents a share, for its fiscal second
quarter ended Dec. 31, compared to $3.65 billion, or 34 cents, a year earlier.
Sales rose 6% to $12.54 billion from $11.84 billion, despite the referral, helped by
stronger-than-expected demand for Microsoft's Xbox 360 video game player.
The results, which reflected the deferral of $1.64 billion in sales and 11 cents a share in
earnings related to a Vista marketing program, still beat Microsoft's own forecast and the
expectations of Wall Street analysts, who expected earnings of 23 cents a share on $12.1
billion in sales.
Microsoft had telegraphed the weak results late last year when it said it would defer at least
$1.5 billion in revenue to help pay for a marketing program designed to boost PC sales among
consumers waiting for Vista.
Despite the expected profit drop, Microsoft shares touched a four-year high Thursday ahead of
the results on optimism that the newest versions of Windows and its Office business program
will give the company a boost in 2007. The products were made available to corporate users in
November and will be rolled out to consumers next week.
Still, some analysts believe the jury is still out on the upgrades to products that have
traditionally provided the bulk of Microsoft's sales and profit. Some have questioned whether
the need for more advanced, heavy-duty hardware required to run some versions of Vista will
affect sales.
"The biggest question for us in trying to test demand for Vista is: Will people keep existing
machines and buy a retail upgrade, or will it require that they upgrade machines?" said Goldman
Sachs analyst Rick Sherlund.
The consumer version of Office 2007 and Vista weren't ready in time for the holidays. So to
encourage consumers to buy personal computers running older versions of the software, Microsoft
gave out coupons for free or discounted upgrades to the newest releases.
Because Microsoft won't be paid for those newer versions until after they are available later
this month, it is shifting $1.5 billion in revenue into the quarter ending in March.
In the five years it took Microsoft to produce Vista, the company has been boosting growth with
a major push into the market for home entertainment products with its Xbox 360 line and Zune
media player. Earlier this month, Microsoft said it sold more Xbox 360 units than expected.
In October, Microsoft had pegged its profit for the second quarter at between 22 cents and 24
cents per share on revenue of between $11.8 and $12.4 billion.
Microsoft shares were little changed in late trading following release of the results, after
touching a multi-year high of $31.48 during the regular session Thursday.
