Microsoft’s Ecosystem Enters New Era

on Oct 19, 2012
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On Thursday Microsoft reported third quarter revenue was $16.01 billion (£9.98 billion) – 8 percent less compared to last year’s figure and below analysts’ average estimates.

**Slowdown in PC Sales Hits Software Giant**
According to the International Data Corporation (IDC) there was an 8.6 percent decline in shipments year-on-year in the third quarter as consumers bought fewer PCs in anticipation of the Windows 8 operating system launch. Intel (NASDAQ:INTC), the company manufacturing the processors that power more than 80 percent of all PCs sold, announced earlier this week its revenues had fallen by 5 percent and profits by 14 percent.

Peter Klein, Microsoft’s CFO:
“While enterprise revenue continued to grow and we managed our expenses, the slowdown in PC demand ahead of the Windows 8 launch resulted in a decline in operating income,”
As reported by the Financial Times, Microsoft missed Wall Street’s expectations for the July-September quarter of $16.48 billion in sales and earnings per share of 56 cents. The company reported 53 cents of earnings and a 26 percent fall in operating income to $5.31 billion (£3.3 billion). Sales of Windows declined 33 percent to $3.24 billion (£2 billion) – $400 million (£249 million) below the average analyst estimate. The business division’s sales represented mostly by the Office software fell 2.4 percent.

The share price remained largely unaffected shedding only 9 cents or 0.32 percent. The stock has risen 14 percent since January but is down 5 percent over the past six months.
!m[Anticipation of the Windows 8 Explains Weak Revenue in the Third Quarter](/uploads/story/604/thumbs/pic1_inline.png)“The Microsoft numbers are a little worse than expected, but for Wall Street, it’s all about Windows 8,” said Mark Moerdler, an analyst at Sanford C. Bernstein & Co. “These are not substantially off enough to change the fact that people are largely going to shrug it off and look towards the launch of Windows 8 to see how that goes.”

**Windows 8 – a “new era”**
Windows 8, Microsoft’s newest operating system, is expected to launch next week with chief executive Steven Ballmer promising a “new era” for the world’s largest software company.
“The launch of Windows 8 is the beginning of a new era at Microsoft. Investments we’ve made over a number of years are now coming together to create a future of exceptional devices and services.” said Mr Ballmer in a press release.

The new operating system has gone through its most radical redesign since Windows 95 in an attempt to make it suitable for both tablets and PCs and secure a place for Microsoft in the increasingly growing mobile market.
On 29 October the company will also push into the smartphone industry with its Windows 8 Phone and in November handsets produced by Nokia and HTC will feature Microsoft’s operating system.
**The Surface Tablet**
Microsoft announced that its first tablet device called Surface RT will be selling for as little as $499 in the US starting October 26th. For the version with 64-gb storage customers will have to spend an additional $100 and the snap-on cover, which includes a full keyboard, will cost $119.99. The tablet features a 10.6-inch display and will run on Windows 8, making the newest operating system available for smartphones, tablets and PCs.
The company has deferred $1.36 billion in revenues from the third to the fourth quarter of 2012 solely based on its Windows upgrade offer and pre-sales of Windows 8 to PC makers.

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