Microsoft Windows 7 Sales Fizzle, Kinect Strong - Windows Falls Short
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Though Microsoft faces longer-term challenges in the PC arena,
its other core product, its suite of Office applications,
generates strong cash flow.
Sales at its Office unit rose 24 percent to $6 billion,
indicating that U.S. businesses are starting to spend more on
technology after the recession.
But consumers are proving less resilient. U.S. initial jobless
claims surged in the latest week to their highest since October,
indicating that any recovery in consumer spending will come only
in fits and starts.
Sales for its Windows unit fell 30 percent to $5.054 billion,
a little short of analysts' expectations of about $5.3 billion,
due to the lukewarm growth in PC sales. The year-ago figure was
swollen by $1.71 billion in deferred revenue and pre-sales from
the launch of Windows 7.
The perennially money-losing online services division, home of
the Bing search engine, posted a 19 percent increase in sales, but
saw its loss widen 17 percent to $543 million. The unit, which is
making only slight headway against Google Inc (NASDAQ:GOOG), has lost
more than $6 billion in the last five years.
Unearned revenue -- a measure of the strength of the business
in Microsoft's pipeline -- fell 9.5 percent to $13.4 billion, a
cause of concern to some investors.
Kinect The Best Hope?
Microsoft reported overall fiscal second-quarter profit of
$6.63 billion, or 77 cents per share, compared with $6.66 billion,
or 74 cents per share, a year earlier. The per share figure was
higher due to a reduction in shares outstanding from last year.
Wall Street was expecting 68 cents per share profit, according
to Thomson Reuters I/B/E/S.
Sales rose 5 percent to $19.95 billion, helped by strong sales
of its Kinect hands-free gaming system and Xbox consoles, handily
beating analysts' average estimate of $19.15 billion.
"Kinect represents the most legitimate opportunity we have
seen for the Xbox to drive some profit. I do think there is a
meaningful catalyst there," said Motley Fool senior analyst Tim
Beyers. "The Windows phone looks good. I do think that Windows
Phone 7 is proving to be an interesting alternative to the
Blackberry.
"I guess the nut of it is, Microsoft is starting to do
something better and they are not tripping on themselves, and that
counts for something."
Microsoft now has $41.2 billion in cash and short-term
investments on its balance sheet. Chief Financial Officer Peter
Klein said he was happy with the cash it is distributing to
shareholders, holding out little hope of a dividend hike, which
some investors would like to see.
(Editing by Edwin Chan and by Phil Berlowitz)
Microsoft Partner 
