Microsoft reports first quarterly loss ever
marketday.msnbc.msn.com
marketday.msnbc.msn.com
I remember the times Microsoft will literally buy you to develop for the xBox or DirectX. I was there and then I saw the people that got bought to say that they felt "trapped" and could not get out from MS tech.
But as new companies with big pockets got into the game, first Google, then the new Apple and then Facebook, the last one with so much money and not really knowing what to do with it, the game did not worked as well as before.
The Microsoft Zune did not work out, Life, Bing and now Lumia are not working out as expected, even after pouring billions from their desktop and Office monopoly.
First, Microsoft has had to play pretty carefully in the past decade to make sure that they don't draw any more antitrust ire.
The other thing would be that they don't have to manipulate the market forever, just long enough to lock out competition.
A perfect example of this in the tech world would be Intel.
They did everything they could to keep AMD locked out of vendors like Dell for years, even when AMD had a superior product. Fast forward a few years, and not only is Intel still the dominate player in the market, but their lead in process technology makes it extremely difficult if not impossible for anyone else to compete. For example, Ivy Bridge has a slightly higher transistor count than AMD's Bulldozer, but has a die roughly half the size of the AMD part.[1] That means that even if AMD was producing a part that performs competitively with Intel, they're going to have difficulty competing with them on price since Intel can crank out more dies per wafer.
Obviously it's entirely speculative whether AMD would have been able to capitalize on increased market share and keep up with Intel long term but Intel doesn't really need to manipulate the market like they used to anymore since they've managed to put themselves in such a comfortably entrenched position.
[1] - http://www.anandtech.com/show/5771/the-intel-ivy-bridge-core...
If Intel really could manipulate the market successfully, AMD would not exist at all, instead of just having slightly lower profit margins but otherwise similar products, as you describe.
And also, there wouldn't be ARM, which seems to be taking more and more marketshare from Intel. Intel couldn't "lock them out."
And by the way, I think the antitrust action against Microsoft accidentally helped them maintain marketshare. If they had been allowed to continue integrating IE into Windows at the expense of much better browsers, that would have been a boon to Apple and Linux. IE isn't such a huge kludge/security problem now, but it used to be a serious competitive disadvantage. (This is just a hokey theory only tangentially related to the discussion, though.)
AMD has been less than financially healthy for years. They've spun off Spansion and GlobalFoundries in the past few years trying to keep head above water.
The point is that Intel was successful in keeping AMD from being able to expand its market share when AMD had a better product and the two were much closer to parity in terms of manufacturing process than they are today. As a result, AMD couldn't afford to reinvest in manufacturing and design, and Intel was able to widen the gap between them.
AMD is still afloat, but they're nowhere near the threat to Intel that they were circa 2000-2005.
>And also, there wouldn't be ARM, which seems to be taking more and more marketshare from Intel. Intel couldn't "lock them out."
ARM was in a completely different market segment that Intel didn't really view as a competitor. As things shift toward mobile, Intel is starting to address that segment, and I think that the process advantage they hold could end up being an even bigger deal there since overall package size and power consumption is such a major factor in mobile. Even if your design is equivalent or slightly better than Intel's from a performance per transistor standpoint, Intel can still win out by being able to churn out more chips than you can at the same cost.
>IE isn't such a huge kludge/security problem now, but it used to be a serious competitive disadvantage. (This is just a hokey theory only tangentially related to the discussion, though.)
Microsoft's bread and butter is the enterprise and IE is still a huge competitive advantage for them there. We're tied hugely to Windows at my workplace almost entirely because of IE.
By the way, ARM couldn't touch Intel if they wanted. ARM's market is not just another league, it's not even the same game. Even so, where low-power x86 vs. ARM can be viable, Intel will win, by default.
Google Chat, I didn't want, but it was integrated into gmail. Suddenly, I'd have chats from friends pop up as I was working. I presume there's some way to unbundle, but at this point, it's too late.
List keeps going. Google is crushing competitors not by building better products, but by using search to steer them there, and the rest of their chain to force users into them.
Google's motto seems to have changed from indexing and organizing the world's information to hoarding, organizing, and locking down the world's information.
Like Microsoft, they're also getting less and less competent. 6 years ago, their software was phenomenal. Today, it's kind of below average -- they've had a huge brain drain to startups, Facebook, and other places (except for Google X, which seems to be poaching quite well).
It's not as bad as Microsoft in it's prime, but it's getting there. I think in a year or two, they'll actually be worse.
People who really don't like Plus and its integration into everything seem to keep using it as some kind of example of Google using monopoly power to force it and its other services to market domination. This just doesn't seem to me to be how it's working. And it completely ignores the fact that all it's actually quite useful to the majority of users, the ones who don't for whatever reason have a problem with it.
> Google Chat, I didn't want, but it was integrated into gmail. Suddenly, I'd have chats from friends pop up as I was working. I presume there's some way to unbundle, but at this point, it's too late.
What does this even mean? Just set yourself to invisible or sign out, and don't go back.
Your "locking down the world's information" comment doesn't seem to make much sense either considering Google is one of the few (if only?) companies to have a data liberation teem, with the explicit goal of making all of your information exportable from Google.
And finally, to call Google's software in general "below average" is just weird. Think about it. Really. It's a weird statement. Their software is better and does more than it did 6 years ago, but has somehow gone from amazing to below average.
IMO Google still isn't anywhere near what Microsoft is. It has quite a long way to fall, if it does.
And yet here we are: http://www.bloomberg.com/news/2012-07-16/google-antitrust-pr...
http://www.businessweek.com/news/2012-01-24/google-faces-eu-...
http://siliconangle.com/blog/2010/10/28/google-clarifies-adw...
They may not be guilty of any of these accusations but they are probably better off taking measures to be as transparent as possible rather than continuously defending themselves...
Microsoft still has an effective desktop OS monopoly. Last I bought a computer, I still had to pay a Windows tax. So their long-run market manipulation seems to be alive and well.
It's true that they haven't been able to dominate new markets effectively. But that says more about the volatility of technology and Microsoft's fear of another Department of Justice beat-down than it does about any principle of economics.
The Internet was a once-a-century disruption. (One that could well have been throttled in its cradle had AT&T not been broken up by government intervention.) Counting on lightning strikes like that, rather than robust regulatory support of competition, strikes me more as a religious outlook than a practical one.
Chances are you actually got a discount thanks to MS. And I don't mean a discount on the OS.
Places like Dell make money mostly on the more expensive hardware, upgrades, and support.
Below this (at the sub-1k level), you're getting a PC at marginal cost (and sometimes a loss), that gets monetized by Dell via desktop real-estate (all the crapware).
The Windows OS costs Dell about $40.
I wonder if this spells the end of Nokia as well? That would be really very sad!
To do the same Nokia should have changed their whole strategy, focus and expertise in less than 5 years, simply impossible for a company that size. Also worth noting, Google bought Android. It was not "complete" at time of acquisition but it wasn't a "lets begin from scratch" kind of project.
The problem with Nokia and Android is that Samsung will always, in every single case, have cheaper and more powerful devices. Maybe Nokia could've keep themselves in the game with a lot of marketing and a bit of luck, but eventually, down the road, Samsung would take over.
On top of that add that Google is getting in the hardware game and arguably the best Android devices will come from them. Even for Samsung the Android strategy might prove to be a bad idea in a couple of years.
Microsoft was bigger than Nokia when, between 1993-2000, they executed several changes of greater magnitude in less than 5 years each (Windows 3, the response to Netscape, Windows NT).
> The problem with Nokia and Android is that Samsung will always, in every single case, have cheaper and more powerful devices. Maybe Nokia could've keep themselves in the game with a lot of marketing and a bit of luck, but eventually, down the road, Samsung would take over
Why? Samsung has only this year started showing small signs of becoming something more than a "fast follower". Nokia used to know how to lead the market... if they still did, they would have no trouble innovating to stay on top of Samsung.
Well there are a lot of smart developers in Finland with a good design sense and the executive screwup at Nokia was no fault of theirs. It's not clear to me that there will be a big enough tech market to absorb them all. So there would probably be a net contraction of smart people doing cool stuff. To me, that's bad.
Also, more competition is always a good thing for the market.
(Note: I don't own a Lumia, and I'd be wary now)
Phone contract runs for up to three years, and people who paid for the top-of-the-line phone are going to feel regret every time they make a call for the next three years. From a reputational standpoint, Elop has burned his platform another time.
I don't think we'll see the domestic players merging but rather an increase in international joint ventures that effectively constitute a merger. Petrobras and Shell, TNK-BP and so forth.
Again, no strategy works forever, they work for varying lengths of time.
"The market" doesn't do things. Saying that the market will take care of something is like saying the internet will take care of something; it requires a willful ignorance of the details.
Markets are human constructs designed to achieve particular ends. They have known failure modes and monopoly is one of them. There is no reason we need to sit around waiting for a monopoly to self-destruct, paying monopoly rents and having progress stifled in the meantime.
Didn't help though, I didn't work on MS technologies.
From TFA: "Analysts were expecting a $5.3 billion profit for the quarter, but that was canceled out by an even bigger loss on a five-year-old acquisition."
No, analysts were not expecting a $5.3B profit before the report; if they were they should probably not be in their jobs anymore. The after-hours price of MSFT shows that this news was already priced in and the loss was actually smaller that what was expected.
Geez.
Please, enlighten me.
Windows and Windows live revenues were down. There is a footnote which that this includes a reduction for deferred income due to rebate programs, but even if you add that back in, Windows revenue is still down.
However, it gets stranger. Windows revenue + unearned income is higher than it was a year ago, though not by much compared to other business units. So it is very hard to say what it actually means.
I can not think of any other company that pays so much attention to it's developer community. I know, many around here may not have experience with as an MSDN member, but I do.
And trust me, having to deal with the likes of Apple AND Google, I miss MS' developer programs terribly.
There's a reason why Apple and Google are dominant now, and it's not just marketing, luck and timing. They've built fertile marketplaces that (especially) independent developers can leverage to create cottage industries if not empires, instead of simply make a living doing VBA and VC++ CRUD applications.
Oh, XNA and C# may be truly saner to handle than Cocoa and Java, but who truly gives a damn when you can't keep the lights on with your .exe file on Windows.
http://arstechnica.com/gaming/2012/07/microsoft-comes-under-...
Want me to link to the "thousands" of disgruntled articles about Apple's or Oracles' developer relations?
I left out Google, cause they do a hell of a better job in that department than Apple does.
Look I know I'm bashing Apple and Oracle. Cause right now, those are the platforms what I'm working in. But I've been an Apple fan boy for years. Ever since my first Power Macintosh (back in the day). And Apple has never had good relations with it's developers. But today it's the worse I've ever seen.
But not like most of have a choice. We write for where the masses are. And right now, Apple is everywhere and in my case, Oracle too. I just wish, sometimes they'd (Apple mostly) remember what it was like when they were starving. ;)
Not anymore they don't.
http://www.reddit.com/r/programming/comments/u3pqj/microsoft...
http://www.reddit.com/r/programming/comments/v3vi8/targeting...
http://www.zdnet.com/blog/microsoft/microsoft-quietly-cuts-n...
http://arstechnica.com/gaming/2012/07/microsoft-comes-under-...
This is fairly standard practice. Just much more noticeable when it is MS and it is such a large purchase price.
Microsoft needs another visionary at the helm, or it will never make a comeback.
The MS share price has underperformed both the NASDAQ and the Dow Jones since he took over and a company that had never posted a loss now has.
The Xbox has lost money over all time (if you include initial costs), the Zune failed, Windows 8 is yet to be released. Despite massive investment last time I checked their on-line services division (give or take 400 million users) still lost money.
And they've gone from being the tech company you couldn't ignore to one that you can.
The only reason it looks fine is that Windows and Office keep bringing home the bacon but with the declining PC market (except Macs) and the rise of the smartphone and tablet markets (in which MS are currently, roughly, nowhere), how long will that be for?
Did you include royalties from each title and dev kits? I just would like to remind you that the only company in the game industry who make money with hardware is Nintendo. All other ones lose money on hardware and recover those loses from titles sells.
If you do have the support for saying that Xbox has lost money I will be very interested on reading that :)
The same article also mentions that the year before the unit lost $1.9bn (the red ring of death issues hitting it hard).
You'd have hoped that once it turned profit it would have been upwards from there but while it remained profitable in 2009, the figures dropped 66% to a $169m [2]. In 2010 profits were up to $618m and then in 2011 $1.32bn which is obviously great but even if you add those four profitable years together you're only $500m or so over the loss from 2007.
Against that you've got all the development costs in the run up to the launch of the 360 in 2005 and the entire loss making life of the original Xbox (launched 2001 but would have been running up development costs for a couple of years before that at least).
The success recently and the launch of Kinnect will have likely increased it's profitability since 2011, but while I don't have links (though I have gone through it before, I just don't have the time now) I don't believe it's come close to wiping out those original losses.
[1] http://kotaku.com/5026559/xbox-division-finally-reports-prof... [2] http://kotaku.com/5321559/xbox-division-sees-66-percent-slid...
Monkey that triples shareholder value in a multi-billion dollar company? I'll take two please.
Profits soar. Share prices soar. A few years later, as reputation catches up with quality and support, as there are no new products in the R&D pipeline, and as you have no core competencies, and as your best employees leave, the company tanks.
You walk of with a ton of cash from early-year bonuses.
In the last few months I had a chance to meet some folks from Google, Facebook, Apple and Microsoft. Some are my friends and some I've only met a few times. The first three companies seemed to have retained a ton of engineers that are hard working, driven, passionate about their products and their field. Meanwhile, I only met 1 person at Microsoft who truly was excited about being at MS. Everyone else, who was passionate, left MS either a few years ago or just recently.
You may think that my sample size is too small, but I tend to trust the gut feeling. What saw at MS was a company full of good people, but no one in particular cared about the success of the company. They were all there because it was a good job, a stable pay check, maybe even an educational experience. Meanwhile, folks I got to talk to at Google and Facebook and particularly at Apple were all committed to the cause, hungry to outsmart and outdo their competition. I think that speaks to the company culture and culture speaks to success.
All said, I think MS is doomed because they got too comfortable, too used to the easy money. Microsoft is really good at piloting a massive ship that slowly and steadily moves through the deep waters. But, as the waters are drying, they may just get stuck. To continue prospering, Microsoft needs to innovate, to reinvent themselves, to be agile again. They may get lucky and acquired the next big thing, which will bring them prosperity for years to come, but they may not and if they don't, they will be toast at the current state of affairs.
Lastly, this is a lesson to all of us. If you want your company to succeed, you cannot get comfortable. Like Steve Jobs said in his biography, you have to cannibalize yourself or your competition will do it for you. Your and your company has to keep running the marathon as if you have just started the journey.
Agree with me, disagree with me, bash me for not believing in Microsoft, that's okay. All I know, I will be sure to run this marathon fast and smart and I won't let my company to slow down and get on the death spiral. Come, run along, we'll have a good time.
But MS was never particularly innovative. Seriously, how many significant innovations did they come up with?
> All I know, I will be sure to run this marathon fast and smart and I won't let my company to slow down and get on the death spiral.
:-)
1> Microsoft continues to place big bets on markets which matter. It is not sitting on fancy profits. 2> It has a terrible management team.
How does company marketing influence these decisions?
Was their a financial reason to take the write-down in one large chunk? Or within a certain timeframe?
Microsoft's core businesses, especially Office, are humming along. The franchise is pretty strong and the overall company is a cash generating beast.
Still significant a bit, but much less than an operating loss instead of a writeoff would've been.
Revenue is up on the whole except Windows, where it is down slightly even before the deferral.
Expenses are up much more, resulting in the loss. It isn't clear what they are spending on though.
Moreover cash income is up. Even Windows grew when you add revenue to unearned cash.
This tells me some interesting things:
* Orders are up, fulfillment is up everywhere except Windows where orders are up and fulfilment is down even before adding in the deferral.
* Microsoft's spending us significantly up.
Also, a mass produced phone built in China and sold in Walmart is a lot of things, but tasteful it is not.
Excellent point...
Also, a mass produced phone built in China and sold in Walmart is a lot of things, but tasteful it is not.
... terrible point!
That has only really bore fruit in the US though. MS have less than 5 percent share of search worldwide.
"Google bought their way into search by paying firefox"
Google actually had a larger share of the search market prior to the Firefox deal.
Google already owned search when firefox finally had nontrivial market share. They did not "buy their way into search", the transformed the market with an excellent product (Google altavista, the undisputed king until Google came).
At some point, they started paying e.g. mozilla to maintain their position.
But they reached that position based on merit. (A rather uncommon event, unfortunately).
http://cnnmoneytech.tumblr.com/post/10483503055/eric-schmidt...
*recoiledsnake originally had the word "lying" in his comment. I just noticed he edited that out.
From a results-based perspective, it more-or-less is. But actually capturing the market is hard to imagine. Search engines in general seem to be reaching the limits of filtering 5 billion pages based on 2 or 3 word queries.
"There was some suggestion that Mr Gates may be anxious to keep Apple afloat to forestall a scenario where, following an Apple demise, a virtual monopoly hold by Microsoft on the software market would inevitably attract negative attention from fair competition regulators in Washington."
http://www.independent.co.uk/news/business/apple-grabs-150m-...
Edit:
"The server and tools unit delivered fourth quarter revenue growth of 13 percent and the business division, which features Office, was up 7 percent. Microsoft's entertainment and device division saw revenue jump 20 percent largely because it now includes Skype."
Note that some major acquisition costs are responsible for the loss this quarter. Also given the right moves Microsoft seems to be making (for e.g. Surface announcement and Low pricing of the Windows 8 upgrades), it will be interesting to see what direction it takes from here onwards.
From article: "Earlier this month, the company said it was taking a one-time charge of $6.2 billion, almost exactly the amount it paid for aQuantive, an online advertising company it bought in 2007 for $6.3 billion."
this is not clear to me at all
But I bet Office runs better under windows than it does under osx, its the way - code bitching, just hate it.