Microsoft Earnings: Surface Tablet, Windows 8 Sales Reality Check
Microsoft (NASDAQ:MSFT) is expected to announce Q3 2013 earnings today. Those results should provide new clues about Windows 8, Surface tablet and cloud-related sales. The earnings arrive only days after IDC said Q1 2013 PC shipments fell about 14 percent. Most folks assume that’s bad news for Microsoft. But here’s the irony: Even if PC shipments fall, Microsoft’s long-term business could grow. Here’s why.
Think of it this way: Microsoft likely makes about $50 to $100 for each PC sold with Windows, depending on various licensing models. But Microsoft makes about $599 to $999 on each Surface RT or Pro tablet sale. So even if the PC market shrinks, Microsoft could potentially generate more revenue thanks to its hardware focus — though The VAR Guy certainly isn’t making any revenue or profit predictions amid the current market inflection points, which are huge.
Among the variables Microsoft is currently navigating:
- Desktop: The software company in January 2013 insisted that Windows 8 was a hit, selling 60 million licenses. But IDC now says Q1 2013 PC sales shrank 14 percent, and Intel’s (NASDAQ:INTC) financial results from earlier this week were not encouraging. Plus, it doesn’t sound like sales of Windows-based tablets and smartphones are setting the world on fire.
- Server: Here, the story remains stronger — especially for Microsoft’s partners. Windows Server 2012 and its Hyper-V enhancements have been well-received in the market. It’s a safe bet demand for server applications (Lync, SharePoint, Exchange, SQL Server) remains strong, too.
- Cloud: Office 365 is gaining momentum. It sounds like sales are growing more than 100 percent annually. What about Windows Azure? Amid a recent price cut, Azure’s financial performance head-on against Google and Amazon Web Services is unclear. Microsoft’s cloud-oriented partner programs are improving but they still miss the target in some areas. A prime example: Partners that want to manage Office 365 pricing and end-customer billing must sell to customers with 250 or fewer seats. Plus, those Office 365 Open sales require one-year customer commitments — not exactly a cloud-friendly mentality.
Still, the biggest wild card for today’s earnings call is the Windows 8 strategy, where Microsoft is preparing the Blue upgrade and perhaps even a Surface channel partner program. Rumors are swirling that Microsoft may even bring back the classic “Start” button to make Windows 8 less confusing for first-time users.
Either way, The VAR Guy will be back later today with analysis of Microsoft’s Q3 2013 financial results.
People like us (software
People like us (software developers) always want Microsoft
to do well.If it is sinking almost the entire software community sinks in enterprise except $1 android companies
Microsoft doesn’t “make”
Microsoft doesn’t “make” 599-999 on every surface they sell them fro 599-999. I don’t understand the math here