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Microsoft's Earnings Semi-Debacle

Microsoft shocked me with huge revenues and earnings decline. I mean, have you ever heard of Microsoft sales dropping, never mind collapsing 8%? Earnings were down more fiercely, a gut-wrenching 22 percent.

While enduring endless heaps of pundit criticism, Microsoft set sales record after sales record, like clockwork. It was rarely enough to quell the maddening pundit crowd. Now those years of negative prophecies have finally been fulfilled.

Microsoft's problem is the PC's problems. Sales of PCs are down, so OEM Windows sales and sales of new Office copies are concomitantly down. Sales of new PCs were down 8.6% in the third quarter alone.

On the plus side, Microsoft is on the cusp of shipping a huge array of ambitious products, Windows 8, Windows Phone 8, and 2013 versions of Exchange, SharePoint and Lync. Once rolling, these products will start to moo as the cash cows they were built to be.

So what is going on with PCs? There could be a sales lull as folks wait to see Win 8. There is more use of smartphones and tablets for computing and communicating. Virtualization means thin clients can swap in for PCs or PCs can run off servers where the apps are upgraded on the server (and an old PC can always appear new).

And let's face it, after more than 30 years of PC availability, there are so many machines that we sometimes have to pay to get rid of them.

Microsoft execs can take solace in one fact: Google also got dumped on. Its stock got hammered after the company pre-released earnings that were less than Wall Street expected. Twenty billion in market value disappeared before trading was stopped.

What is your theory about PC sales and how many machines do you own? Explain yourself at dbarney@redmondmag.com. 

Posted by Doug Barney on 10/19/2012 at 1:19 PM


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