I’ve got a slight problem with this article. Why highlight Microsoft’s drops in profit and sales as if they are bearers of bad news? They’re only temporary. The author acknowledges the cause for each of the numbers in each paragraph, but maintains a pessimistic outlook…Here’s why I think it’s unnecessary:
Windows 7’s arrival couldn’t have come sooner for Microsoft (NSDQ: MSFT), as the company’s operating system sales could use the boost that the newest version of Windows is likely to provide.
“Couldn’t have come sooner”? “Operating systems sales could use the boost”? The drop in sales was caused directly by the then-upcoming release of Windows 7 - People who knew it was coming were waiting it out to buy a computer. Now that it’s here, people will resume buying computers, and others will upgrade. Microsoft was never in a pinch - There is no need to make them sound like they were.
If anything, the drop should have been considered a positive indicator for the company and shareholders. It proves that consumers were aware of the product, and also anticipated its release.
Sales of Windows and Windows Live products were off 39% in Microsoft’s first fiscal quarter, ended Sept. 30th, the company reported Friday. Much of the drop was due to Microsoft’s deferral of $1.5 billion in Windows revenue in the quarter due to a program under which consumers who purchased a Vista PC could upgrade to Windows 7 for a nominal charge upon the latter’s availability.
Windows 7 was formally released Thursday.
But even with deferrals factored in, Windows sales for the quarter were still down from the same period a year ago. Sales were $2.6 billion without deferrals, compared to $4.3 billion last year. Sales would have been approximately $4.1 billion had revenue not been deferred.
%39 drop in sales of Windows/Windows Live? Most of it due to $1.5 billion in deferred revenue for an upgrade program? $2.6 billion in sales this year, vs. $4.3 billion last year - Oh my god!
One. It’s common, if not expected, that a consumer shouldn’t have to pay full price to upgrade a recent purchase.
Two. Deferred revenue is a liability, but only until the good is delivered. And as the article states, the good was delivered yesterday. And, “sales would have been approximately $4.1 billion had revenue not been deferred”
That’s .2 billion down from last year. Boo hoo.
Three. Now, with all of this considered, why are losses in MS’ first quarter (ended Sept 30) being reported as such a big whoop? For people who don’t understand what deferred revenue is, for most people reading Google News, this could be a very misleading article. Rather than solely report on losses reported ended Sept 30, perhaps more pertinent would be a clarification as to what those numbers from Q1 mean post-Oct 22, and an outlook on profits for Q2 given Microsoft’s releases of Win 7 and Exchange Server.
Either break down the entire financial document for the average reader, or leave the analysis to those of us who actually understand it. Don’t sensationalize important stuff like this.