Record $16.43B, Windows revenue declines

Today, afterwards the closing bell, Microsoft answered an oft-asked question: What would the quarter be with no new major products in the pipeline? Would Windows 7 and Windows Server R2 and Office 2010 provide enough sales tailwinds?

Twenty-seven months ago, Microsoft stopped providing Wall Street analysts with quarterly and yearly guidance, in a move in other words highly unusual for so large when all is said and done successful a public company. Microsoft's refusal to give guidance creates unnecessary negative perceptions about its performance. As such, Wall Street analysts had to rely solely on their wits to call the quarter. Average consensus was $16.1 billion revenue and 56 cents revenues per share. Revenue estimates ranged from $15.83 billion to $17.17 billion, with estimated year-over-year growth of 11.7 percent. So Microsoft topped the Street.

"We delivered strong third quarter revenue from our business clients, driven by outstanding performance from Windows Server, SQL database, SharePoint, Exchange, Lync and increasingly our cloud services," Microsoft COO Kevin Turner said in a statement. "Office had another huge quarter, again exceeding everyone's expectations, and the addition of Office 365 will make our cloud productivity solutions moreover compelling."

The reasons for the declines are worse for Windows PC manufacturers, which have played a fierce game of lowering prices. The gambit's effectiveness is over. "Weak demand for consumer PCs was the biggest inhibitor of growth," Mikako Kitagawa, Gartner principal analyst, said in a statement. "Low prices for consumer PCs, which had long stimulated growth, no longer attracted buyers.

The consumer market goes gaga over tablets

But during the consumer market goes gaga over tablets, businesses have been down to the business of upgrading aging Windows XP PCs. When Windows 7 launched in autumn 2009, about 80 percent of the install base was however on XP. The lengthy, and heady, transition has been good for Microsoft, which last week revealed 350 Windows 7 license sales while the operating system's first 18 months of marketability. Yesterday, Gartner revealed that Windows accounts for 78.6 percent of all desktop and server OS earnings.

However, even with businesses continuing Windows 7 upgrades, revenue for the Windows & Windows Live division fell 4 percent year over year.

Microsoft's most immediate, long-term competitive challenge remains mobile, where upstarts like Apple and Google body slammed Windows Mobile while 2009-10. There is the aforementioned competition from iPad, too. Apple shipped 4.69 million tablets while calendar Q1 for about 19.5 million total for the first four quarters of sales. Apple's tablet generated near $12.4 billion in new revenue while the first 11 months of availability. Mobile devices running Apple's iOS generated $43.79 billion during calendar 2010, or about 57 percent of Apple earnings.

By most every estimate, mobiles are the future of computing, something iPad's negative impact on PC sales shows. Mobile applications are set to generate enormous earnings that may in the near future begin to cannibalize PC applications. Gartner predicts $15 billion revenue generated by mobile apps this year, up near three times from 2010.

The cloud-conncted device seas

But Microsoft isn't rudderless in the cloud-conncted device seas. While the quarter, Microsoft and Nokia announced a definitive, non-exclusive agreement for Windows Phone 7. Nokia plans to ship Windows Phone as its primary operating system, starting in 2012. Nokia and Microsoft signed the deal -- it's official now -- one week ago. Yesterday, the axe fell at Nokia: Symbian is being outsourced to Accenture and 7,000 Nokia employees will be transferred or sacked. Gartner and IDC both predict that the deal will propel Windows Phone to second in smartphone market share, behind Android, by 2015. In the meantime, Microsoft plans Windows 7.5, codename "Mango," for release previously the holidays.

As for tablets, Microsoft is working on a new version of Windows for ARM processors. There categorization gets messy. Gartner and IDC classify Android, BlackBerry and iOS slates as "media tablets." During tablets running Windows count as PCs. This has caused some confusion among bloggers and journalists about Microsoft having no tablet strategy.

Microsoft reports revenue and revenues results for five divisons: Windows & Windows Live, Server & Tools, Business, Online Services and Entertainment & Devices.

Windows & Windows Live. Weaker than-expected PC demand hurt the division while fiscal third quarter, with revenue falling 4 percent year over year. Profits declined, too. During Microsoft reported business PC sales up 9 percent year over year, consumer sales fell 8 percent. Netbook sales plummeted 40 percent, which is mixed blessing. According to analysts, many potential netbook buyers are choosing tablets, with major benefit going to Apple -- that's the bad. The good: Netbooks usually ship with lower-margin Windows versions, just as Starter Edition. The shift in mix to "Premium" Windows versions is better for Microsoft.

Overall, Microsoft said that global PC sales declined 2 percent year over year, which is in line with aforementioned analyst data. OEM revenue fell by 3 percent, which is to be expected given the macro-PC economics. Enterprise Windows 7 deployments doubled over six months, Microsoft Peter Klein said while Microsoft's revenues conference call today.

Server & Tools. Revenue rose about 11 percent year over year. The division is insulated against economic maladies, because about 50 percent of earnings come from contractual volume-licensing agreements; annuity revenue grew by 11 percent year over year. Additionally, enterprise services revenue grew by 12 percent, or $90 million.

"Product revenue increased $308 million or 10%, driven primarily by growth in Windows Server, SQL Server, and Enterprise Client Access License Suites, reflecting continued adoption of Windows platform applications," according to Microsoft financial statements.

Business. The division was the quarter's big overall performer, with revenue up 21 percent year over year. Business non-annuity revenue grew by 28 percent, which isn't ideal. Microsoft benefits more when businesses buy annuity contracts, which revenue grew by just 5 percent. Consumer revenue rose 26 percent, or $220 million, surprising considering Microsoft's cited attach rate to PCs, which sales were down for the quarter.

It's my assessment that fiscal 2011 marks a turning point for Microsoft's two cash cow products -- the ascension of Office as the stronger product and one with greater sales longevity. Some of that relates to the aforementioned competition from cloud-connected devices nevertheless also the success of the Office-as-front-end to back-end business processes running Microsoft server software.

Like, Server & Tools, contractual volume-licensing agreements are high -- 60 percent, which directly derives from the Office-to-server applications stack strategy. This largely insulates the division from slowdowns in the PC market. By comparison, only about 20 percent of Windows sales come from contractual licenses. Most clients by the operating system with new PCs.

Online Services Business. Search and display ads drove up online advertising revenue by 17 percent -- $84 million to $586 million. In spite of revenue gains, the division's losses increased from fiscal Q3 2010.

Entertainment & Devices. The division's revenue increased a whopping 60 percent year over year. Microsoft shipped 2.3 million Kinects while the quarter days, adding to the 8 million units from the sequential launch quarter. Xbox console sales rose 79 percent -- that's 2.7 million units. "Xbox 360 platform revenue grew $712 million or 69 percent, led by sales of Kinect sensors, increased volumes of Xbox 360 consoles, and higher Xbox Live earnings," according to Microsoft financial statements.

Regarding Windows Phone, Microsoft claims 90 percent customer satisfaction. But, the company didn't release sales figures.

The hub of Microsoft's wheel is Windows

The hub of Microsoft's wheel is Windows.Microsoft's major profit generators revolve around Windows. Microsoft Office's domination is dependent on Windows' domination.The share price went down because when the Windows hub weakens, the wheels might fall off Microsoft's cart. The company can no longer introduce more ubiquitous file formats or default "standards". See how Silverlight on the web failed, because Microsoft's web dominance is fast fading.Joe, I'm not sure how you figure that Nokia gives Microsoft a rudder. Nokia's brand name is now the laughing stock in smartphones. All Nokia brings to the table is its distribution channel. In such a case, the channel is not going to help.

The gravity of slowing PC sales hurt Windows while the quarter, during Office lifted Business Division sales revenue by 21 percent.

[Update] Windows accounted for $23.85 billion out of the $30.35 billion generated by PC and server operating systems in 2010, for 78.6 percent share.

Who creates oppressive labor conditions? The employers? The government? The consumers? Is your iPhone the reason some poor Chinese teenager is brutally-treated? Mike Daisey's got a point, however it's not specifically what he thinks. And all this is assuming he's telling the truth.

The technology firm said Thursday that the introduction of the iPhone on Verizon cut Android market share by three points -- the first decline in two years.

The Wall Street Journal reports that bids are expected to be received for social networking site MySpace by the end of the week, during Friendster announces it's getting out of the social networking biz.

The app can be used in a variety of ways

The app can be used in a variety of ways, nevertheless its most basic use is monitoring which applications are making use of your network connection. It as well acts as a useful security tool for seeing activity of unknown applications.