Wednesday, January 23, 2008

Microsoft FY08Q2 Results

FY08Q2: As always, my favorite post-analysis sites for the results:

At a simple level, I feel anything that Microsoft reports is like spitting in the wind during the current financial storm. I'll be interested in hearing if we have anything encouraging to say as being a safe-haven for investors during this period, given the current releases and the upcoming releases.

Mr. Todd Bishop has a preview and nails my concern about the analysts concern of our forward looking statements. Also - though I doubt it will come up except as a generalized catch-all warning - with the EU feeling us up again to try to figure where we moved our wallet to, we have more legal uncertainty to deal with.


Update: After the release...

FY08Q1: ba-da-Boom!

FY08Q2: ba-da-BING! (or should that be, "ba-da-Cha-CHING!"?)

Channeling an upbeat attitude that could be heard as, "no, really, our poo doesn't stink," Mr. Liddell got to take lead on one of the most positive and reassuring Microsoft quarterly results conference calls I've heard in a long time. He expressed extreme pleasure over the results, as do I imagine every Microsoftie (unless you do want to point at the stinky poo of OSB and how E&D / Xbox has a deep, deep hole of billions to fill income into).

I'd say every time I heard an analyst try to give Mr. Liddell a soft-pitch opportunity to say something negative or overly cautious, Mr. Liddell was like, "Nope, things are going great, and will continue going great. Or greater."

Safe-haven for the investors' money, indeed!

Oh, and kudos to Jason Maynard for asking Liddell about the new EU actions and how that figured into Liddell's thinking. Not much of a meaty answer (well, most of the answers weren't very meaty) but it was nice to hear such a challenging question. I hope it comes up again during our Friday Town Hall Meeting in 34, though I wouldn't expect a more detailed answer.

Follow-up posts:

MSFTExtremeMakeover: Q2 FY08 Earnings. Snippet:

Short version: strong results, increased guidance, generally upbeat tone, and no really embarrassing items for analysts to question. Good job! Yes, online continues to be a sinkhole for cash. But everyone is used to that by now, and at least the top line result is semi-respectable. Yes, there's still no color on actual large scale Vista deployments. But at least client revenue and unearned remains solid. Bottom line, if last report was sufficient to get some investors to take another look at MSFT, then this one should attract others and perhaps reduce doubts that last time was merely a fluke.

Mr. Joe Wilcox: Microsoft Watch - Corporate - Microsoft Q2 2008 by the Numbers. Snippet:

Liddell's confidence may have something to do with where Microsoft makes its money. Just four years ago, the majority of revenue came from North America. Now, 60 percent of sales are outside the United States, Liddell said. For the quarter, Microsoft sales increased 30 percent in emerging markets, 20 percent in established markets like Europe and 15 percent in the United States.

Even if the U.S. economy slows down, overseas sales could offset any decreases in technology spending here.

Mr. Todd Bishop: Microsoft beats quarterly estimates, raises forecast. Snippet:

Microsoft's Online Services Business was the only one of the company's five divisions to post an operating loss for the quarter, $245 million in the red. The company's Entertainment and Devices Division climbed to a $357 million operating profit thanks to holiday video-game sales. Chris Liddell, the company's chief financial officer, said this afternoon that Microsoft is still expecting that division to be profitable for the full fiscal year, which ends in June.

And the general attitude of the rest of the reports:

Ba-da-cha-CHING!

Now, let's be sure we don't start slipping back to our old sloppy ways, because, well, our poo does stink. Just like everyone else's.


37 comments:

Anonymous said...

I should have sold everything I could weeks ago when it was over $34. We won't see that again for a year. We suck.

Anonymous said...

Mini,
What are your comments on the "xboxfounder" posts and interviews about the XBox 360's quality problems?

Charles said...

Echoing the previous: the Xbox 360 "interview" is at http://www.8bitjoystick.com/archives/jake_inside_source_reveal_the_truth_about_xbox_360_red_ring_of_death_failures.php
and suggests there was a rush to market; and wondering how, since it won't make back the money, and has now lost a lot of goodwill, things can be righted.

Did Xbox make an appearance in the FY results? Musta. What they say?

Anonymous said...

good thing you didn't sell. shares went well over $34 in after-hours trading.

by your logic, i guess, we don't suck? yay, i feel better already.

talk about horrible predictions, unless year=day or something.

Anonymous said...

I should have sold everything I could weeks ago when it was over $34. We won't see that again for a year. We suck.

Ooops!

Good call, seeing as we're already at $34.67 after hours...

Anonymous said...

To anonymous who said:
I should have sold everything I could weeks ago when it was over $34. We won't see that again for a year. We suck.


Take a look at the earnings and guidance today. You have a strange definition of "suck." Or perhaps by "we" you meant people like yourself who post non-constructive whining comments on minimsft...

Anonymous said...

Waaam!!


'nuff said

Anonymous said...

"Even with Xbox price reductions, Microsoft now earns money on the console" - Chief Accounting Officer Frank Brod

Very good news there.

Anonymous said...

"Even with Xbox price reductions, Microsoft now earns money on the console" - Chief Accounting Officer Frank Brod

Very good news there."

I would hope so given that the recents articles/posts outlining all the problems with xbox hardware. It would be a sad state of affairs if we were not making money on defective hardware.

Justmy2¢ said...

Anonymous 10:44 said...
"Even with Xbox price reductions, Microsoft now earns money on the console"

... and then looses all of that and more with the 30% failure rate.

(Funny how a half-truth can be as misleading as a whole lie)

Anonymous said...

gotta give props to the stevie b and the management team, posting these kinds of numbers in this economy is impressive.

vista sp1 looks solid and with server 08 launching, Microsoft is in great shape! Challenges remain, but the core remains strong.

Anonymous said...

Congradulations Microsoft! There are alot of people working hard to achieve this success and it feels great to be growing and prospering. It was great knowing Microsoft's earnings were the top line story of the day in the US financial markets.

Anonymous said...

haha, I notice how the whigners are now clinging onto XBox 360 hardware failures in a desperate attempt to poo-poo the numbers.

I find it funny simply because nobody would ever call the PS2 a failure and people go through PS2's like underwear. The fact is, the 360 is a succesful consumer product in the sense that MS has finally got some street cred with the people that matter...gamers. What you hear time and time again on gaming forums is that while people rightly moan about the hardware failures, they tough it out because...guess what? The games are great! Clearly (at least in two of the three largest markets) gamers are not abandoning the 360 for the PS3.

Provided MS learn from this, it could very well turn out to have been a blessing in disguise for the next console. I highly doubt the same mistake will be made again.

So in a nutshell, MS is doing alot better than anyone expected in the gaming industry.

PS. I know someone is going to bring up the Wii...yeah, see...different market segment altogether if you ask me.

Anonymous said...

(Mini, feel free to toss this into the bit bucket since it is a slightly off-topic tangent, but I'll try to relate it to the topic if I can.

While our earnings are looking good compared to other Seattle area companies outside of the Tech sector, it seems like we're missing the boat on a major thing that would help improve Vista adoption; or more specifically, x64 Vista adoption...We can't seem to make our own software work well with x64!!!

On my new Laptop, it absolutely ROCKS with x64 Vista, but after 2 weeks running x64, I had to re-install at x86 because to many features I'd grown used to in MS software just didn't exist when installed on x64. Silverlight is great, but apparently runs in only x86 IE (so what is the incentive to run x64 IE???). Grove has limited functionality in x64. And the "Send to FAX Recepient" in Office doesn't work because installing Office on x64 doesn't install the "Office Document Image Writer" printer, which the FAXing feature utilizes.

On the plus side, all of the drivers on that machine were available x64, but that vendor is doing much better about x64 drivers than a few other vendors (and I don't want to name names, but anyone in the field knows who is really bad about drivers, especially x64 ones). My printers at home all worked, I even had basic print & scan functionality out of my All-In-One printer/faxer/scanner device that is 4+ years old.

It was the lack of support from our own software that drove me back to x86. I WANT to run x64 Vista, but until we can get our own house in order and make x64 a priority for the application groups, how can we expect 3rd party companies to do any better?

x64 Vista is amazing compared to x86, but more and more people are installing x86 because the features they need in their apps are just not available on x64. Maybe someone in MSIT needs to give the heads of the App devisions the numbers on x86 vs x64 deployment internally (I'd imagine it is skewed heavily towards x86) as a club to beat them over the head with so that they can make x64 a reality for their apps. If we're not running it internally, then why would anyone externally do so?


Just another guy in the field

Anonymous said...

yipee!! a super quarter! let's do it again.

Stephe said...

Great quarter but not a whole lot of love for the stock price. Could it be that the street isn't buying all that "irrational exuberance" from Liddell?

Anonymous said...

To just another guy in the field... x64 isn't going to happen overnight, but we're getting there. Office 14 is slated to ship in full 64 (and 32) and most of that work is even already done from what I can tell as a dev in that org. Once the most widely used apps are shipping in 64, I think we'll see others follow.

Anonymous said...

"x64 Vista is amazing compared to x86"

I'm curious about this comment: what does x64 Vista have or do that makes it amazing in comparison to x86? I'm sure there are benefits, but I don't know what they are because I'm still running x86; I'd like to know what I'm missing out on.

Anonymous said...

Great quarter but not a whole lot of love for the stock price. Could it be that the street isn't buying all that "irrational exuberance" from Liddell?

Oh for crying out loud -- if you don't realize that there's nothing we can do at this point to move the stock price significantly short of discovering another planet of Microsoft-ready alien customers...

Really, this was a spectacular quarter for us and all the nay-sayers are starting to get on my nerves. WHAT MUST WE DO, exactly, for the stock price to go up?

Although I'm usually not a fanboy of my company (I'm MSFT) and I'm the first to wish that Ballmer would become soylent green, right now I need to just take a few minutes to enjoy our success and have some champagne.

Anonymous said...

Could it be that the street isn't buying all that "irrational exuberance" from Liddell?

The street loves what MSFT is doing and what it will do in the coming quarters. You can check the analyst comments in the link below.

http://blogs.barrons.com/techtraderdaily/2008/01/25/microsoft-goes-flat-line-despite-strong-earnings-higher-guidance-and-analyst-enthusiasm-that-cant-be-good/

Under the current market conditions traders will sell their best stocks like MSFT to keep cash on hand. Once the market turns they will start buying. If you don’t need the money, then I would not sell. The market will be back during the 2nd week in August and will rise steadily until the end of this year. Until then, the market will trade sideways with several more wild swings downwards.

Unfortunately MSFT will drop for the next two days with the next support level at $31.51. You will see a quick rise of $0.30 - $0.60 and then trade downwards with the next support level at $30.98 and $30.52. It looks like Monday is going to be a wild ride with the NASDAQ futures already pointing down 40 points and DOW futures down 190 points. The downward trend will continue on Mon and Tuesday and will reverse course once the fed cuts (hopefully) rates on Wednesday. Friday will be a down day when most people will sell to lock in their profits.

This is like playing poker. The person with the most chips can bully a person with the best cards to lay down their hand. Don’t let anyone bully you in selling your shares. Hold on to it until the end of this year, it will be back in the $37-$40 range.

Anonymous said...

"x64 Vista is amazing compared to x86"

I'm curious about this comment: what does x64 Vista have or do that makes it amazing in comparison to x86? I'm sure there are benefits, but I don't know what they are because I'm still running x86; I'd like to know what I'm missing out on.


On the same hardware (Lenovo T61P, 4GB RAM) x64 Vista is more responsive, snappier, and in general, performs better than when booted to x86 Vista. At least, that has been my experiences with it.

And I'm just doing normal stuff like e-mail, web browsing, etc. Start doing things like running VirtualPC and you'll really benefit from x64. One of my coworkers was dual-booting his T61P between x86 Vista and RC0 of Server 2008 as opposed to just running x64 all the time because he missed the missing app features mentioned in the original post, but wanted x64 (especially x64 W2K8 for Hyper-V). He said he also had Office and such installed on his W2K8 boot and said that x64 W2K8 was usually faster than x64 or x86 Vista on the same hardware. And yes, he had the Desktop Experience pack installed, Themes enabled, and was running Aero Glass on W2K8. So while it wasn't a complete apples-to-apples comparision of W2K8 to Vista, it wasn't apples-to-oranges either as he had as many of the Vista features enabled. He always said that the other thing that kept him from just running x64 W2K8 as his laptop OS was that Spider Solatire and the other games aren't available on server SKUs.

Anonymous said...

To just another guy in the field... x64 isn't going to happen overnight, but we're getting there. Office 14 is slated to ship in full 64 (and 32) and most of that work is even already done from what I can tell as a dev in that org. Once the most widely used apps are shipping in 64, I think we'll see others follow.

But will faxing from Office be back in x64 Office 14? One of my teammates won't stop grumbling about that as the reason he went back to x86 Vista from x64. If he had been able to send the FAXs, he'd have been singing the praises of x64 Vista. But our team scans a lot of receipts to submit with our expense reports, so making that process more difficult does have a significant impact to our productivity.

Anonymous said...

"haha, I notice how the whigners are now clinging onto XBox 360 hardware failures in a desperate attempt to poo-poo the numbers."

No one is trying to poo-poo the numbers. They are what they are.

I think I can safely say that a majority of the folks on mini are MSFT owners so its in their best interest for the numbers to be good and the stock to go up. I think people are just trying to make the point that maybe the numbers would be even better if xbox was not going through the numerous problems.

Anonymous said...

"I think I can safely say that a majority of the folks on mini are MSFT owners so its in their best interest for the numbers to be good and the stock to go up. I think people are just trying to make the point that maybe the numbers would be even better if xbox was not going through the numerous problems."

I think it's important to keep in mind that with a business as diverse and huge as Microsoft, something will *always* be broken and in dire need of being fixed because it's a sink hole. We're in dozens of businesses and there will be fires to put out somewhere whenever you take a snapshot of a moment in time.

The point is that in spite of Xbox and other trouble spots we gave a stellar showing. Obviously when it comes to managing the business as a whole, somebody -- or a group of somebodys -- is doing something right. Could we have made more? Yes. Will it ever be the case that this can't be said? No.

Anonymous said...

"I think it's important to keep in mind that with a business as diverse and huge as Microsoft, something will *always* be broken and in dire need of being fixed because it's a sink hole. We're in dozens of businesses and there will be fires to put out somewhere whenever you take a snapshot of a moment in time."

Good point, however, there are a few things that MS should just shut down to stop the bleeding. MSN/Search is one of those examples. We are losing tons of money on Search and have seen zero progress. In fact our market share is declining. At least xbox is competitve with the likes of PS3.

Anonymous said...

I think it's important to keep in mind that with a business as diverse and huge as Microsoft, something will *always* be broken and in dire need of being fixed because it's a sink hole.

In other words, when a company has the capital to enter and remain in every market regardless of success or failure, you're going to see a lot of losses.

Anonymous said...

I'm the first to wish that Ballmer would become soylent green

Barf! ;-)

Anonymous said...

"I think it's important to keep in mind that with a business as diverse and huge as Microsoft, something will *always* be broken and in dire need of being fixed because it's a sink hole."

In other words, when a company has the capital to enter and remain in every market regardless of success or failure, you're going to see a lot of losses.


I'm sorry, what dimension are you living in? In this dimension, you saw a quarterly earnings report that blew the doors off expectations.

In other words, when a company has the capital to enter and remain in markets regardless of success or failure while they keep trying to figure out how to succeed, and when that company has enough strong product lines that are cash cows, you're going to see the exceptionally strong earnings that Microsoft posted this quarter.

Give me a friggin' break. You can't spin this quarter into a negative for Microsoft no matter how hard you try, it just appears foolish.

Anonymous said...

Cant find Amir Majidimehr (was VP, Digital Media Division) in the Address Book...Gone?

MSFTextrememakeover said...

"In other words, when a company has the capital to enter and remain in markets regardless of success or failure while they keep trying to figure out how to succeed, and when that company has enough strong product lines that are cash cows, you're going to see the exceptionally strong earnings that Microsoft posted this quarter."

There's some truth to both of your positions. The quarterly results were strong, primarily on the back of those legacy cash cows. And it does make sense to use some of that money to invest in the next potential winners. The problem is that MSFT's track record on that latter effort is poor - as in horrible. The problem with having near endless cash to fund new ventures is that you can make bad decisions w/o the normal repercussions (e.g. going out of business). Too often, MSFT has substituted cash for intelligent strategy and execution, the result being losses and payback periods that are far greater than originally forecast and totally inconsistent with industry norms.

Anonymous said...

http://www.windowsserver2008.com/

Didn't someone from the Legal team think to start fighting this domain name? Since it is a trademarked name, the dispute for this one would be a no-brainer decision in Microsoft's favor.

Anonymous said...

Cant find Amir Majidimehr (was VP, Digital Media Division) in the Address Book...Gone?

I forgot to mention in my previous post that it is through Amir's postings at avsforum that he revealed he has retired.

Anonymous said...

What?! $45B for YHOO?

YHOO up 60% to 30.50
(market cap up 15B)

MSFT down 3% to 31.65
(market cap down 9B)

net positive, with MSFT owners getting hurt and YHOO/MSFT almost an even trade now

Anonymous said...

YahOOOOOO. MS is buying Yahoo for $45 Ga-Billion, a 62% premium then the company is worth. Hmmm, is this really a good idea in its quest to compete with Google. Being a last place company in the area of "search" and then buying a company who is also really behind the game does not really equate to becoming competitive to Google. It does not magically change the position of either company. It just makes you a very big company with lots of people which I think is something that you guys at MS already hate. But i guess it just goes back to what some of the people here who have said already that when you have a "seemingly" endless cash flow, the need to make good decisions not needed. The only problem with this thinking is that all good things must come to an end (i.e., the Windows and Office cash cow). I am not saying they will completely disappear but competition and technology is changing and the gravy train will slow down.

Hey you think it was Jerry Yang's trick all along to run down Yahoo and then have a sucker buy it out while he cashes in? Smart move.

Anonymous said...

hey mini
wake up
your blog entry for yahoo is missing here in europe ;-)

steveb is allready awake and bought a company

Anonymous said...

Taking over Yahoo! in a hostile manner?

I thought Microsoft Search was the best?

http://www.cnbc.com/id/22947600

Anonymous said...

Microsoft adds 12,000 Yahoo employees to its workforce.