Microsoft profits: the notes of caution
Microsoft’s latest financial figures, in the wake of the release of Windows 7, are clearly a success. But there are some mitigating factors and other points which should hold the company’s attention.
Before going any further, let’s make clear that I am not belittling the figures. As Dave Parrack noted earlier, revenues of $19.02 billion and profits of $6.66 billion in three months are great news for the firm and its stockholders.
One point to note from the figures is that they include around $1.7 billion in pre-sales of Windows 7 from before the financial quarter. This represents money the firm had already received but didn’t chalk up in the books as the system hadn’t yet shipped. Of course, money is money, but it does mean nobody should expect the revenue from Windows 7 shown in these figures to be anywhere close to the amount Microsoft can reasonably expect to receive in future quarters.
Another point of context is that the year-on-year comparisons may give a misleading impression. The same quarter in 2008 was itself a major slump for the firm, with profits down more than 10 percent. That was understandable given that consumers and businesses were starting to realize just how serious the global financial picture had become at the time, but it does mean that even an average performance by Microsoft this time round would have looked good in comparison. Throw in the fact that it launched a new operating system, a relatively rare event, and some — but by no means all — of the apparent financial boost is artificial.
Finally, besides Windows, the only major Microsoft division to see a revenue increase was the one which deals with Office. The firm’s business and online divisions both had revenue drops, while the entertainment and mobile division had lower takings but cut costs enough to wind up with a bigger profit.
So while Microsoft will be celebrating the figures, there is still much work to do to make sure the success continues once the initial fuss over Windows 7 dies off.
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