Microsoft's quarterly profit drops below Apple's for the first time in 20 years | Hacker News Reader

Microsoft's quarterly profit drops below Apple's for the first time in 20 years

mashable.com

116 pointsmapk81 comments

Misleading. Microsoft's quarterly profit grew pretty quickly (above 30%). It's just that Apple's profit grew faster, causing it to take the lead in the race.

Guys, I didn't mean to start such a discussion over the wording. I said it was misleading, not "cannot be interpreted correctly."

In particular, by saying that X's profit dropped below Y's for the first time (without context of X and Y) suggests TO ME that X's profit dropped when that was not the case.

By "misleading," I meant that had I not known profit figures already, I would have assumed the title meant that Microsoft's profit had fallen. It means that the understanding it leads you to believe initially is incorrect, hence misleading.

I downvoted your original post because I read "misleading" as implying that it was intentionally, wilfully misleading - i.e. lying. But you're correct: the wording misled you (and understandably so) to an incorrect conclusion. Apologies.

No worries. Perhaps my use of "misleading" was itself misleading!

I don't see what's misleading here. Doesn't your sentence basically mean the same thing the title does? As you said, microsoft's profits grew slower, and they had lower profits than apple did, which means the story title is far from misleading.

MS didn't drop below Apple, Apple grew above MS. It's a pretty important distinction - drop means they declined, Apple is now making more money than Microsoft, and Microsoft is making more money than they used to too.

When describing standing in sports you don't say "X won less than Y so Y is ahead", you say "X dropped below Y in the standings". Most financial reporting is based on sports speech.

Standings are a relative measure. Profits are not. You can say MS dropped below Apple in the rankings of profits. Likewise, one would NOT say in sports that X dropped below Y in wins. You'd say that Y passed X in wins.

I don't think it's misleading. Since it says that MS profit "drops below Apple's", it's making reference to a relative difference, in which case it did drop.

It can be understood in multiple ways, maybe not intentionally misleading but it could be written better.

"My height grew above Yao Ming's last year". Did I surpass his height last year or grow more during that period of time?

In that case, you are now taller than Yao Ming. The subject of the sentence is your height, and you said it grew 'above'. Therefore the only valid interpretation is that your height is now above Yao Ming's. For it to be interpreted the other way, you would have had to say "My height grew _faster_ than Yao Ming's last year", or "My height _growth_ was above Yao Ming's last year". My point is that people can interpret things any way they want, but that doesn't mean their interpretation is valid.

Hah, we're getting off topic. You're right, phrasing it that way leads to multiple interpretations whether correct incorrect. When I read the title originally, I was thinking "total profit" instead of relative. Whether intentional or not, I think the title could have been worded better.

Not misleading at all. You just misunderstood. A drop is a drop even when it's relative.

For me, it's more interesting that Apple did this without a lot of the shady business & licensing practices that Microsoft engages in.

Edit: Before downvoting me, take a look at my comment history. I'm not your typical Apple fan/Microsoft basher.

Ha! Suing competitors over dubious patents; pushing for legislation to punish people for using their own hardware how they see fit; trying their hardest to keep people from using iPods and iPhones with anything but iTunes; designing special screws to lock people out of working on their own Macs and iDevices, increasing service revenue; abusing their control over the App Store to keep out competitors; instituting a new App Store policy to force content providers to pay 30% to Apple, and disallowing providers from raising prices in the App Store vs. on other platforms to cover this cost...

None of this sounds the least bit shady to you?

Do you think Apple's walled approach to iOS apps and content on iOS platforms is more honorable than Microsoft's open development initiative? (i.e. letting anyone write Windows applications).

To me, their decision to prevent iOS apps from getting content outside of its walled garden (and bypass the 30% fee) is much more anti-competitive than whatever Microsoft did.

I don't know if anyone downvoted you (I didn't). I just wanted to hear your opinion. I'd like to hear what you mean by 'shady', and what in particular about Microsoft makes it shadier.

"Do you think Apple's walled approach to iOS apps and content on iOS platforms is more honorable than Microsoft's open development initiative? (i.e. letting anyone write Windows applications)."

I can make an OS X application and market it, distribute it in any way I wish. I can even use Apple's IDE, libraries, and compiler tools.

Why are you comparing that to the device OS (which by the way, Microsoft also implements a similarly restricted approach for in their Windows Phone Marketplace).

Sorry, that was a bad comparison. I just wanted to compare Apple's most popular platform to Microsoft's. But you're right, the circumstances are different. Apples and Oranges, I know.

Definitely what Microsoft participated in has been much shadier. I'm not sure it can be reasonably argued otherwise.

Everything from forcing hardware vendors to bundle their OS to forcing Internet Explorer installs to the infamous Halloween documents to their covert dealings with SCO & everyone else over Linux and patents.

Surprisingly, it still seems pretty hard to get the hardware I want without paying for a Windows OS I:

1.) Won't use, because I'd throw Linux on it. 2.) Don't need, because I already have several valid Windows licenses which are unused.

But yes, certainly some of Apple's walled garden/30% actions are alarming.

http://en.wikipedia.org/wiki/Microsoft_antitrust http://en.wikipedia.org/wiki/Halloween_documents

... you can get apple hardware without paying for OSX?

Please stop trolling. Microsoft did a ton of shady things. For instance: Colluding with SCO to spread Linux IP FUD [1]; suing Lindows around the world, even“ex parte,” and getting a ruling from some a Dutch judge that every day someone could download Lindows from the Netherlands, Lindows owed MSFT an additional 100,000€ for trademark violation [2]; the whole Java Embrace, Extend, Extinguish thing; forcing OEMs to not ship PCs with Linux installed if they wanted standard OEM discounts on Windows; the whole federally-convicted-of-antitrust bit; etc.

And I for one LOVE the walled garden as it provides me with demonstrably higher-quality, malware-free apps that don’t just rip off someone else’s IP/icon haphazardly the way most Android apps seem to do. The walled garden does NOT prevent end users from installing web apps to the home screen, sans Apple approval. It is also NOT anticompetitive, unless you know something no one else does.

[1]: http://news.cnet.com/2100-7344_3-5172426.html?tag=nefd_lede

[2]: http://www.eweek.com/c/a/Linux-and-Open-Source/Microsoft-Kee... and http://www.wired.com/techbiz/media/news/2004/03/62644 and more generically http://en.wikipedia.org/wiki/index.html?curid=465335

I was not trolling. I had a fundamental disagreement and wanted to understand where he was coming from.

Additionally, whether some anti-competitive action benefits you in the short term is irrelevant because it often does. (For example, Microsoft "Bundling" IE led you to have free browsers) They are anti-competitive because companies are sacrificing short term potential to wall off their competitors, hence "walled garden."

>And I for one LOVE the walled garden as it provides me with demonstrably higher-quality, malware-free apps that don’t just rip off someone else’s IP/icon haphazardly the way most Android apps seem to do.

I am sure that you're happy that Google was left hanging for a year and that an Android app was banned from the App Store. http://www.pcmag.com/article2/0,2817,2373502,00.asp

And there are a whole ton of low quality apps in the iOS app store as well.

Microsoft is using the same "walled approach" in Windows Phone 7.

And Apple is using the same "open development initiative" approach in OS X.

I'm curious as to why you feel that "(Apple's walled garden approach) is much more anti-competitive than whatever Microsoft did" when Microsoft is pursuing the same approach in the same space.

How is the "walled garden" anti-competitive. It doesn't stop anyone from writing applications for android, WebOS, etc. Apple is selling a hardware experience. We have a choice, use IOS devices with the walled garden experience, or use an alternative like Android or WebOS devices. Furthermore, "honor" has nothing to do with the ability to write apps for a platform without paying a fee. This is not similar to Microsoft's anti-competitive practices in the past.

Just like any browser could run on the Mac or Linux, and ignore Windows if they preferred. Or Dell could sell Linux machines, and not Windows if they didn't want to.

The point is that Apple and MS both used the fact that vendors need them to make money (and while competitors for both exist, competitors yielded less likely return), and leveraged that position.

>How is the "walled garden" anti-competitive. It doesn't stop anyone from writing applications for android, WebOS, etc

Microsoft got a lot of flak for just shipping IE with the OS, whereas Apple doesn't even allow alternate browser engines such as Firefox and Chrome on iOS.

Couple that with some capricious and silly rejecting or stonewalling of apps such as Google Voice and an Android magazine apps and I feel Apple is worse than Microsoft in asserting control over the ecosystem.

Also remember Apple having to back pedal from developers even generating code from non-sanctioned languages. It was the first time in history, that I recall, where a vendor not only specified a language, but also specified how code for that language was generated.

I agree with you there, that was pretty ridiculous when I first saw they were attempting to do that. I will say though, I don't believe that was necessarily to force people to buy macs to develop. I think that by keeping people on the same toolchain, using the predetermined API's and LLVM, they could make major enhancements without having to worry about all the 3rd-party apps still working.

You can use any browser engine you want on OS X. The point of comparison obviously has to be Windows Mobile 7, not Windows 7.

Oh, and Microsoft got flak because they were behaving in an anticompetitive way. Shipping your OS with only ine browser engine is usually no problem and only in very specific instances illegal.

Controlling the ecosystem it created is not anti-competitive. There seems to be confusion over not being able to distribute apps on Apple's platform, and not being able to compete against apple.

Um, "whatever Microsoft did" was so shady it's illegal. Apple may be heavy-handed in how they manage their platform, but they don't do anything to prevent consumers from using competing platforms.

They both make dick moves every day and get soundly rewarded for doing so.

Which implies that most consumers don't consider them to be dick moves.

Or that most consumers don't have a choice in the matter (especially in regards to MS - I don't have a laptop running Windows & Office because I like Windows & Office).

That's the question, isn't it? If the user feels like they don't have a choice (and especially if it's because any potential choice has been intentionally squelched by the reigning monopolist), then it starts to seem dickish. There are plenty of alternative mobile platforms and thus it's rare to see people complain that they're forced into using an iPhone.

(raises hand) I complained about having to use an iPhone - mostly because of AT&T though. Thankfully, both Verizon moved in and I moved on from that job.

There are so many possible disconnections between the individual purchasing decisions of customers and the moves, dick or otherwise, which large businesses make, that I don't see how there is warrant to connect the one as a passing of any sort of judgement on the other at all.

For instance, a customer can love the output of a supply chain, and abhor some part (or the implications of some part) of that supply chain. This isn't at all like a thermometer measuring temperature here.

Human beings deserve uncrippled tools, so I consider Apple's iOS appliances to be unworthy of us. But their customers are at least willingly buying into that dystopia, unlike Microsoft customers who were usually confronted with vendors who couldn't dare to sell you a box with a competing operating system even when asked.

Well, you could always buy a Mac.

It's just a question of the degree of lock-in. And Apple is a master of lock-in: purchased apps for iOS and Mac OS X don't work anywhere else, FairPlay prevents movies purchased from iTunes from working elsewhere, AirTunes is locked via DRM to iTunes, things like MagSafe are protected with patents to maintain their profit margins, and so on.

I keep it simple; Apple contributes to open source projects that could be (and have been) used as direct competitors to their own, while MS sues companies who implement open source software.

"a lot of the shady business & licensing practices that Microsoft engages in"

Um... you are wrong. These companies are all suing each other, and Apple is known for creating patents for every little thing they do in iOS.

Apple has never done anything approaching what Microsoft did to Be and Hitachi

I guess I was most amazed that in 1991 Apple's profits were greater than Microsoft's. I was playing Ultima 6 and King's Quest V back then... I didn't know anything existed but the IBM PC.

Office came out in 1990 and took a while to take over. MS-DOS wasn't as profitable as Windows would be.

Their margin was certainly higher. Macs were brutally expensive around that time. It was no trick at all to drop $10,000 on a high-end Mac system.

What I think is most interesting about this is that 1. People continue to compare Microsoft and Apple as if they were directly competing, in spite of the fact the Apple is [primarily] a hardware company and MS is [primarily a software co. and 2. In spite of being primarily a hardware company, Apple is still able to be more profitable than Microsoft. They truly do release their hardware as if it were software, iterating and releasing a new version nearly every year. Even more surprising is that people actually buy this new hardware annually, as if it were a software upgrade

Hardware is not software, but it's trending in that direction. The price of the raw components keeps falling, we are headed towards a future where a tablet is really a hardware dongle for an operating system or an advertising platform.

Its not only blog commenters, pundits or people.

You wouldn't believe how much MSFT people are fixated on Apple despite having no direct competition between each other (except Zune Vs. iPod, but I would say it doesn't count). The fruit word and the fruit logo used to come up in almost every external powerpoint presentations/briefings five or four years ago, it was crazy. They are/were fascinated by Apple and lack any ability to even understand how they work and, of course, learn from them.

For some reason, I find it hard to imagine a keynote in Cupertino with a pixelated Windows logo in every slide. But I might be wrong.

I hear now they are fascinated by Google, now.

Two things - Windows license down 4% year-over-year(!) while macs rose 28%, and $728 million loss this quarter alone competing with Google. Thats a run-rate of $3b loss just to compete with Google - at some point one has to think this assault - plus competition from Apple and facebook - will finally start hurting Google a lot.

Can someone please explain why Apple spends relatively so much less than Microsoft on R&D? I would've thought it's the opposite.

I would look at it from the perspective of Microsoft spending so much more than everyone else.

Research encompasses a lot of things at MS, from pure research labs in Redmond, Boston, Cambridge to online services and live labs. Microsoft runs perhaps the largest CS research organization in existence, when basic research is considered alongside product research such as Bing and Photosynth.

MSR grew to be so by the promotion of Nathan Myhrvold, and the buy-in he was able to get from Gates and Ballmer. It maintains itself by being able to collect a lot of talent, and keeping them interested. But like Lucent, it probably only survives as long as the company is growing.

In many ways Bill Gates seems to view MSResearch and the Gates Foundation as his legacy, more than Microsoft proper. Whereas for Steve, I think Apple is his legacy.

Microsoft does a lot of basic research, not just applied research.

What we need to focus here is this...despite the decrease in PC sales, Microsoft managed to grow. They did not just grow a little, but they grew tremendously. 30%? that's a huge number for a company like Microsoft. Nonetheless, Apple has reached another huge milestone in their history.

Right, I think the point is this says more good things about Apple and doesn't really say that MS faces impending doom. Both companies are quite impressive, just more so for Apple. To grow a megacap company in double digits is quite a feat.

Their revenue grew 13% yoy and earnings include 5 cents one off tax benefit. Without that earnings still grew about 24% coming out of a recession. What caused Microsoft's share price to fall massively yesterday was that Windows revenues actually decreased, which is rather surprising.

MSFT is down 4.4% now: http://www.marketwatch.com/story/microsoft-offers-more-muted...

Probably has to do with concurrent reasons why Apple is overtaking them in profitability, notably, the iPad is absorbing the netbook market (MS reported netbook sales down 40%).

Stocks move for odd reasons. Not based on the news directly, but based on the news relative to what the market thought the news would be.

While it is significant that Microsoft's falling behind Apple, I'm not particularly surprised that OS sales are slightly lower than it was last year at Microsoft. Last year was the start of the launch of Windows 7.

herp-derp. Title should had rather been: Apple's profit is higher than Microsoft's for the first time in 20 years.

Microsoft spends a significant amount on basic research, like Bell labs used to and Microsoft research publishes a lot of publications. 15% of the research budget goes to universities for research, that could keep the profits lower than Apple.

May 2010: marketCap(AAPL) > marketCap(MSFT)

"Bah, it's revenue that matters"

October 2010: revenue(AAPL) > revenue(MSFT)

"Bah, profit is the real metric"

April 2011: profit(AAPL) > profit(MSFT)

"Bah, basic research is where it's at!"

I was just making an observation, not making an excuse for Microsoft. Apple may have "won" long ago vs. MS for all I care, if that is what you want me to say. I don't know how my reply got twisted into something that I didn't say.

I was also just making an observation that I thought was amusing. I was just riffing off of your post, not degrading it. Not all replies are arguments.

I agree that Microsoft has done a lot of great research, and I hope that some day they can turn more of it into products. Alas, from reading the pub directory at llvm.org, for example, I get the impression that when something similar to Bartok & Singularity become products for real users they're going to come from elsewhere.

Time will tell, though.

I do love my Kinect.

Nothing new. Some people get very excited about anything that might somehow be construed as negative about Apple.

After all, we need to nip it in the bud before even a seemingly innocent comment can set the precedent that Apple criticism is acceptable.

In fact, Microsoft spends around $2-2.5b on R&D per quarter [1] while Apple spends $500-600m [2]. That certainly more than makes up for the difference.

[1] http://finance.yahoo.com/q/is?s=MSFT

[2] http://www.google.com/finance?q=NASDAQ:AAPL&fstype=ii

I was on a team once at Apple with ~15 people on it. At one point, we found out the equivalent group at Microsoft had ~500 people.

Most people I've talked to who worked elsewhere are shocked at how small the teams at Apple are.

What group is that? From what I hear most groups at MS aren't huge either -- unless you aggregate them (for example Visual Studio, counting all of the languages, shells, debuggers, etc...).

Unless you're going to say there are only 15 people on iOS. In which case I will be seriously impressed!

When I was at Apple, I was on a team of 6 within the server group. When I told a friend in CoreOS that we had 6 people, he wanted to know what justified our team being so large!

Oh, and if you want an Apples to Apples comparison...I was there when the Server group merged with the Dev Tools group...and the merged group is maybe 300 engineers total (all of server was about 70 engineers...all told OS X and iOS combined only comes to something like 3000 engineers).

A fun little link: http://www.wolframalpha.com/input/?i=revenue+per+employee+at...

all told OS X and iOS combined only comes to something like 3000 engineers

That sounds about right. For Win7 about 2500 engineers (1000 devs, 1000 testers, 500 PMs). I suspect WP7 is probably 500 engineers. So Windows + WP7 is probably right around the same number.

Interesting to think that in terms of products where Apple and MS compete directly, they probably have very similar headcounts. There's a mythology that MS is this huge beast that will crush you (at least in the past). But in reality MS ships 100+ different products. The company is spread a lot thinner than lay people might imagine.

http://www.pc-wholesale.com/networking-news-a-small-army-of-...

Did you find the small team size a pleasant experience? Is it a case of many small teams adding up to a lot of people, or genuinely few small teams?

My experience was that it was genuinely small teams...and it was fun! It's one of the ways that Apple maintains a startup-like atmosphere despite being such a large company. Oh, and Apple remains a very flat company. I was 5 degrees removed from Steve Jobs, and I don't know anyone that was more than 8...including retail staff!

> Oh, and Apple remains a very flat company. I was 5 degrees removed from Steve Jobs, and I don't know anyone that was more than 8...including retail staff!

This sounds funny from my POV because I work mostly with startups now so I'm usually 0-1 levels away from the CEO. In the last 2 weeks alone I've ended up in F2F conversations with folks who I originally thought were some bizdev guy, perhaps a senior technical architecht, but no, turns out, that was the CEO. (... ", bitch." <--- per The Social Network) I was in a conversation the other day with a guy who was the CEO of a potential competitor, but at the time I didn't know he was the CEO, or that they were a potential competitor, and likewise in reverse. Funny stuff.

So yeah, this whole "flat company" with a mere 5-8 levels of hierarchy, makes me giggle. Back to my Terminal session, which this CEO considers his office. :)

(not criticising, just pointing out the humor of relative POV's)

So I don't understand. Are you saying that research money is essentially a donation so that's why it doesn't "count"? Isn't the point of a company's research team to develop profit centers that not only cover their own costs but then some? Because the way I'm reading this Apple's R&D is doing it better and more efficiently.

If you're comparing short-term profits it might be significant, in that it could indicate whether the profits indicate sustainable growth or just "eating the seed corn" via R&D cost cutting which sacrifices future profits. Though over a long period (but how long? years? decades?) it shouldn't matter, since as you point out if past R&D expenses were effective from a business POV they should be reflected in future profits.

> Microsoft spends a significant amount on basic research, like Bell labs used to and Microsoft research publishes a lot of publications.

I've always felt they spent so much on "research", in part, as a way to reduce their reported profits. Because Microsoft was notorious for mostly just copying what others did first (see Apple --- and yes I know about Xerox PARC), or acquiring/rebranding/integrating (Spyglass -> IE, etc.), and only a small percentage of so-called original/in-house stuff. When the original version of C# and .NET came out it was so hilariously obvious what they were ripping off at that time (cough-Java-cough), they didn't quite shave off all the boilerplate for those in the know. But They Capitalized Differently. Oooooh. ;)

On a related note, I once knew someone who officially worked in software R&D. And I noted they mostly spent a lot of time surfing the web and then parroting some sexy sounding thing they read about recently. Ironically (or not?) I think that's a not un-legitimate way, and certainly can be an effective way, to introduce new thinking inside a particular company, or introduce a new technology, like say as a pilot project. But to describe this process as requiring heavy spending (on software R&D mind you, not talking about hardware stuff) sounds ridiculous and an unnecessary money sink. Find a smart creative engineer. Take them off the leash. See where they go, what shiny nuggets they bring back. That's how you do practical software R&D, outside of academia. Doesn't require billions. Just brains, and it can be a side product of what your staff is already doing anyway -- if you have the right staff.

The basic research budget (MSR) is a pretty small part (2%?) of the overall MSFT R&D budget. Though probably still one of the biggest industrial research budgets.

Microsoft can keep this up until profits are growing. Here's hoping this research funding doesn't dry up like Bell labs' did. It is hard to quantify the benefits of spending on basic research. Apple puts a lot of focus on design, wheres Microsoft on technology (or science?).

And?

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