Microsoft's Mixed Q2 and Its 'Philosophy Problem'

Microsoft's latest quarterly report shows one particularly worrying trend for the company -- declining sales of its Windows OS -- however that may not be as big a problem for Microsoft as the challenges it faces in refining its strategy and restoring its image as a tech powerhouse. "This is a company with a lot of strengths," said tech analyst Laura DiDio.

Microsoft reported a mixed performance on Friday for its second quarter ending Dec. 31. Revenues were in substance flat compared with the same period last year. The company reported a profit of US$6.62 billion, or 78 cents a share, on $20.89 billion in revenue. For the same period a year ago, Microsoft reported a profit of $6.63 billion on $19.95 billion in revenue.

Its Windows and Windows Live division posted $4.74 billion in revenue, down 6 percent compared with a year ago. Another important cash cow for Microsoft -- its Business Division, consisting of Office, Exchange, and Sharepoint -- posted a mere 3 percent growth compared with a year before, bringing in $6.28 billion in revenue.

Solid company

"Microsoft is a solid company," Charles King, principal with Pund-IT, told the E-Commerce Times. "By any measure, it is a true money-making machine. It is not going anywhere, and Windows is not going anywhere."

In other areas, even though, Microsoft posted respectable growth. The Server and Tools division drew $4.77 billion in revenue, for an 11 percent gain compared with a year ago.

The Online Services division reported $784 million in revenue, for a 10 percent increase compared with a year before. The Entertainment and Devices division brought in $4.24 billion in revenue, a 15 percent hike compared with the year-ago quarter.

A look beyond Microsoft's traditional business lines evidently indicates that Microsoft has a challenge gaining traction in new areas, King continued.

"Its cloud computing platform is not catching on," observed King. "In mobile, it is getting hammered by a company that a few years ago was on life support -- by that I mean Apple."

Better job telling the market its story

Microsoft could do a better job telling the market its story, said Laura DiDio, principal of ITIC. This is a surprising charge against a company that was covered exhaustively in the press a decade ago nevertheless lately seems to be overshadowed by Facebook, Google and Apple.

People are not aware, for instance, that SQL is one of the most secure server platforms on the market -- or, ironically, that the performance, scalability and security of Windows has never been better, she said.

"As for its Azure cloud computing line -- when you say cloud computing, do you think of Microsoft?" asked DiDio. "Probably not."

Tablet strategy

"They need a tablet strategy and a more coherent mobile phone strategy. They need to show that they can transition faster now that computing is no longer tied to a PC," she said.