When you're charged with saving the PC market, you have some
big shoes to fill. So far, Microsoft (NASDAQ:
) isn't filling them. On Thursday, Microsoft reported earnings
and Wall Street is not impressed. In pre-market trading Friday,
the stock is down more than 1 percent.
The Redmond, Washington company posted revenues of $6.4
billion-down from $6.6 billion one year earlier and about $100
million less than analyst expectations. EPS was 76 cents, also
down year over year from the previous year's 78 cents and beating
expectations by one cent. Terrible? No. Impressive? Not really.
In order to save the PC, Microsoft is going to need
The heart of the PC is Windows. Sure, there have been other
operating systems, but when the world thinks of the PC, it thinks
of Windows. According to
, a Windows operating system runs on 91 percent of all computers
compared to Apple's (NASDAQ:
) 6.3 percent share.
This makes any new version of Windows arguably more important
to the PC market than to Microsoft. Companies like Dell, (NASDAQ:
) Hewlett-Packard (NYSE:
) and Intel (NASDAQ:
) rely heavily on Microsoft to wow consumers with each Windows
upgrade, but the response to Windows 8 has been tepid.
Intel reported earnings that fell 27 percent from the previous
year, according to the company's
. It shipped 6 percent fewer PC chips last quarter, the division
responsible for two thirds of its revenue.
Languishing Dell is considering going private (with Microsoft
showing interest as a potential buyer, ironically).
Hewlett-Packard is down 40 percent and looking very J.C.
) with all of the marketing language of a company on life
support. "Transition," "turn-around," "reinvention," and "company
shake-up" are just a few of the terms being used.
There's no doubt that the PC market is slowly dying but is it
fair to say that Microsoft didn't give the PC a booster shot with
Windows 8? Thursday's earnings revealed that Windows sales jumped
24 percent to $5.8 billion in the last three months of the
In comparison, Windows 7 produced a 74 percent increase and
Vista, the operating system everybody hated, produced a 65
percent spike. (Of course, people had to purchase Vista before
they could hate it.)
When asked, Microsoft blamed the slumping PC market and to
some degree, that's a reasonable assertion, but investors want
something more from Microsoft. They want a company, like Apple,
that is ahead of the market. A company that is leading and
shaping market demand rather than hoping it responds favorably to
another update to a 27-year-old product.
According to the
, Microsoft sold 60 million Windows 8 licenses. There are two
important caveats to this number. Microsoft slashed the price for
current users wanting to upgrade to $39.99-down from $120 for
Windows 7. Second, Microsoft reported that its advertising
expenses, mostly tied to Windows 8, increased 49 percent.
Finally, investors might remember that Microsoft boasted of
selling 4 million licenses in the first three days of the Windows
8 launch. Sounds impressive but Apple, the company with a six
percent share of the PC market, sold 3 million copies in the
first three days.
The PC market needs a "wow" and it was hoping to get it from
Windows 8. Thursday's numbers were respectable. To save the PC
will be a Herculean task. That's going to take something much
bigger than Windows 8.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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