The posted loss totals $492 Million and is the result of their write down of the entire value of failed marketing purchase Aquantive. The value of this was $6.2 Billion which is only $100 Million less than what Microsoft initially paid for the company back in 2007. The original move was an attempt to compete with Google and was seen by many as a knee jerk reaction to Google’s purchase of Double Click. The was further reinforced by the fact that once Microsoft had their new toy they did not know what to do with it and it began to fall apart quickly. However, even with the $6.2 Billion write down Microsoft would have not had any growth. In Q2 2011 Microsoft posted profit of $5.9 Billion taking away the $6.2 Billion only shows a difference of 300Million. This means that Microsoft would have shown been down over Q2 2011 by around $192 Million (or about 3%). This is not a massive difference to be sure, but it still shows something of a downward trend after a record Q1.
Oddly enough Microsoft’s stock and revenue were both up with a rise in revenue of 4% and a stock increase of 1.6%. Both of these are surely welcome news to Microsoft as they are moving into the launch of Windows 8 which is due out on October 26th of this year. Windows 8, for many analysts represents a make or break product for Microsoft as they have been struggling to maintain relevancy in a market that many feel has passed them by. What many analysts are overlooking though is that fact that while smartphones and tablets are exceptionally popular they are not replacement devices, but are companion products. This means that while sales of tablets and smartphones are on the rise and are seen as cannibalizing PC sales all they are doing is delaying PC sales. If you consider that you can get a decent notebook for the same price as an iPad many people will chose the iPad now and get the notebook later. The market is a changing dynamic and just as notebooks and game consoles were seen as killing off the desktop after they had matured we are seeing the same thing with Tablets and smartphones. It is a historical progression that we have seen in the market again and again.
Microsoft still faces a tough Q3 and 4 as the market is not sure where they stand with Windows 8. It is a piece of software that makes sense from a business perspective (if you are Microsoft), but it is also one that is contrary to what Microsoft has been telling us for the past 5 years. It is no longer “your” PC. With Microsoft’s surface and Windows RT the future is even more uncertain as Microsoft has formally announced that you will not be getting Outlook with the built in Office suite. Instead you will have to rely on the built in Mail app which is not that great of an app to use and still has issues connecting to some mail sources. One of the greatest threats to Microsoft right now is their “if we build it they will come” attitude. There are far more consumer choices now than there was before which means that Microsoft must cater to the consumer to win them back. Unfortunately, we just do not see that with Windows 8 yet…
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