Posted on 02/01/2011 12:12:05 PM PST by SeekAndFind
The iPad is killing Microsoft (MSFT), at least if you believe the meme that has been spreading in the stock market.
After Microsoft reported its second-quarter earnings last Thursday, the stock fell 4% despite stronger-than-expected financials and several analysts raising their price targets on the stock. But investors were taken in by the idea that Microsoft's future earnings are so much roadkill in the iPad Era.
Microsoft's quarterly revenue came in at $19.95 billion, above the $19.14 billion estimated by analysts, and its earnings of 77 cents a share beat the analysts' expectations of 68 cents per share. Revenue was especially strong in productivity software and gaming devices.
But the only thing investors seemed to focus on was the rise of the tablets and the decline of the netbooks.
It's true that tablets are eating into the market for netbooks and PCs in general. Gartner reckoned that PC shipments grew by 3.1% in the fourth quarter to 93.5 million units, a slower pace than the 4.8% it had estimated. But tablets are growing much, much faster: Strategy Analytics estimates sales of nearly 10 million tablets last quarter (77% of them iPads), up from virtually no tablet sales a year ago.
Don't Believe the Meme
But while memes are wonderful for culture, they may not be so great for financial markets. Microsoft may be a big, sprawling company, but it's hardly acting like a deer in the headlights facing a speeding Steve Jobs at the wheel. Given the decades-old and often bitter rivalry between Apple and Microsoft, that narrative is tempting. But a deeper look into Microsoft's report reveals a company that's surprisingly nimble for its size.
First of all, the idea that Microsoft can't create a phenomenon like the iPad anymore simply isn't true. The iPad sold 2 million units in its first 60 days. The Kinect sold four times as many, tapping mainstream interest much sooner. "Kinect is the fastest-selling consumer electronics device in history," Microsoft CFO Peter Klein said in a conference call with analysts.
What's especially interesting is that the Kinect sold so well despite the lack of buzz in the tech media. Comparing Google search and news trends for the word "Kinect" with that of "iPad," and you'll find that the iPad attracted much more of the public conversation. And yet the Kinect's 8 million sales in November and December surpassed the 7.3 million iPads that Apple sold in the entire fourth quarter.
True, the Kinect's $149 price tag is significantly less than the iPad's $499 starting price. But the Kinect's strong launch suggests that Microsoft hasn't lost its ability to produce innovative products that resonate with consumers.
Multifaceted Strength
In the fourth quarter, Microsoft also demonstrated its ability to maintain strong sales in a highly competitive market. Google (GOOG) has made it clear that, as its business customers grow more comfortable housing data and applications online (or "in the cloud," as it's colloquially called), it plans to go after Microsoft's business software. But Office 2010 sales were surprisingly strong, with license sales up more than 50% higher than the pace Office 2007 had at the same point after its launch.
Investors seemed put off by the 30% decline in revenue and the 40% drop in operating profit for Microsoft's Windows division, the segment that contains operating software for netbooks and PCs. The drop exacerbated concerns that Microsoft's core product was in decline.
But as Microsoft pointed out in its conference call, the 30% revenue drop was largely the result of deferred revenue that was recognized a year ago during the launch of Windows 7. Factoring out the effect of the Windows launch, Microsoft estimated growth around 3%, "in line with PC market growth." Again, 3% growth isn't terrific, but it's nowhere near as bad as the headline figure suggests.
Even if Microsoft's Windows revenue does start to slide in coming years, the company can weather the blow. Sure, Windows revenue makes up a quarter of Microsoft's total sales. But its business-software division -- including Office, as well as SharePoint and Exchange -- contributes 30% of its revenue, and that division expanded its profit by 35% last quarter.
Other divisions are seeing similarly strong profit growth. Microsoft's server and tools division, which makes up another 22% of revenue, saw its profit rise by 21%. And the entertainment group, which makes Xbox and Kinect and accounts for 19% of revenue, posted profit growth of a whopping 86%.
Is Microsoft Undervalued?
In spite of all this growth, Microsoft's price-to-earnings ratio lounges at 12 on a historical basis and a mere 10 based on estimated earnings for the current fiscal year. That's well below the average P/E ratio of 18 for the Standard & Poor's 500 Index. Such is the power of the meme in the minds of Microsoft investors.
None of this means to play down the challenges that Microsoft faces as tablets and smartphones become more integrated into consumers' lives. The company faces an uphill battle in those markets. Windows Phone 7 is good enough to compete with Android and iOS, but Microsoft waited too long to enter the smartphone race. The same seems to be happening with tablets, as early reviews of Windows Phone 7 tablets haven't been promising.
But we've been hearing for years that PCs are on the decline in an era of cloud computing. And in response, Microsoft has been positioning itself for a post-PC world for some time, building on areas of strength that could serve it in the future – especially business software and video games.
The threat of tablets to Microsoft is real and shouldn't be trivialized. But neither should Microsoft's ability to keep sales and profits growing in other areas of its broad-based businesses.
Since Jobs replaced himself with a sodomite,
don’t think I’ll be sending money apple’s way anytime soon.
Watch for the new iFag coming your way next year.
Got a link ?
post 19
A tablet will not replace my desktop computer(s), but it will replace my laptop.
I wanted a device to take to meetings. I wanted to be able to record at least the audio. I wanted to be able to have the dozen, if not hundreds, of catalogs that support my sales all on one device, electronically. I wanted to be able to share this information with others in the meeting.
A small laptop seemed to be the solution, but battery life was often an issue, requiring me to carry around the power brick and cord. Audio recording worked, sort of, but the built in microphones tended to be VERY directional, so I would have to set up an external microphone, which looked stupid and was one more thing to carry. As for the catalogs, while I could pull them up on the screen, sharing meant turning the laptop, now tethered by a power cord and microphone, towards the customer.
The iPad is perfect for my uses. The longer battery life means no power cord in the field. It seems to have a much more omnidirectional microphone that picks up conversations just fine. I am able to access all the catalogs I need really fast with a wi-fi connection and still pretty fast when running on the cellular network. It is very cool to be sitting in a meeting talking with a prospect who is telling you his needs and just about the time he has stopped speaking I have several possible solutions on screen that I can just hand him. It has changed the way we work with clients.
Do you trust a "gay" Rag ?
I think that is a very important observation. When Microsoft became dominant, hardware had become a cheap commodity, but operating systems were hard to come by. Today, the operating systems are much easier to come by. You're right. It's a very different ballgame this time around. No one operating system is going to dominate. Providers will have to compete on the total user experience and convenience provided by a device.
But you are wrong... Android is NOT 1st in "sales," not where it counts: the exchange of something of value for cash. Android is first in GIVING IT AWAY! Apple is 1st where it counts: at the bank with 51% of all cell phone sales profits!
53% of the market share is 53% of the market share no matter how much you shout.
http://new.lowendmac.com/ed/leeds/11al/other-side.html
[snip] Ubuntu is great. Rakarrack is great. That old PC, with a few tweaks and a few upcoming upgrades, will be really great.
What’s not so great? CRT monitors in a small space.
That’s where I had to get really creative. Since I don’t have a flatscreen to spare, at least for the moment, I had to come up with a really neat alternative. My choice: my iPad.
Yes, the PC is now a semi-headless server, controlled via my iPad with TeamViewer (my favorite remote access app for iOS, Mac, Windows, and Linux - and possibly Android too). Even when optimized for speed, it has a little bit of a lag, but it’s light on the CPU, and it does what I ask it to do. [unsnip]
They do have gaydar. They are the ones that out people. I would believe they don’t want to get sued for libel. Specially a guy that has a lot of money.
If you are not planning to preach the
shalom b'SHEM Yah'shua HaMashiach
gospel to him, what is your concern ?
There speaks a man who does not use it every day to be productive. I do. So do hundreds of thousands of others. You denigrate something you do not use, so you know not of what you speak. The cloud opens my iPad to terabytes of data that I DON'T HAVE TO CARRY WITH ME, or put at security risk. The ability to access my office files from anywhere makes me far more productive.
And your point is? Both OSX and iOS work just fine with Exchange... so why kill it?
Sure the cloud is awesome up until somebody’s internet connection gets hosed. Wonder how the cloud was doing for Egypt. Stop shouting.
One example from the articles: “After Cook was profiled as a “lifelong bachelor” and “intensely private” elsewhere, we wondered if he might be gay. We’ve since heard from two well-placed sources that this is indeed the case”
Rumor. Might be true, but it is interesting that all this gay talk is only relatively recent.
It gets more fun.
Two of your articles just quote the gawker article, which acknowledges he hasn’t come out as gay.
The best part: “Cook would be, by far, the most powerful openly gay executive in tech, trailed by Microsoft’s openly lesbian HR chief Lisa Brummel and by Megan Smith, the former PlanetOut CEO now working as Google’s vice president of new business development.”
Time for you to boycott Microsoft and Google.
Nielsen Q410 U.S. mobile OS market share: Apple iOS 28%, RIM BlackBerry 27%, Google Android 27%Tuesday, February 01, 2011 - 04:15 PM EST
"The competition between smartphone operating systems is a heated one. When it comes to the installed base, U.S. mobile consumers who already own smartphones, Apple's iOS leads with 28%, followed closely by RIM BlackBerry and Google's Android, each with 27%," Don Kellogg, Senior Manager, Telecom Practice Research and Insights, reports for The Nielsen Company.
You know this. Why do you try to prevent challenges to obviously flawed arguments?
I don’t use Google and I’ve never bought a windows product that wasn’t bundled to hardware I was buying.
I don’t know why YOU have such a beef with someone stating their own reasons as to why they won’t buy a product. I never said YOU had to change your buying habits.
It’s not desktops vs tablets. They augment each other.
The laptop was a compromise, cramming as much desktop into a portable box as possible - incuding what did not need to be portable.
The tablet makes portable the needs which must be portable, leaving the desktop to supply the non portable needs behind. I can take email, surfing, remote access, etc anywhere now, while leaving the giant screens, multiple cores, and terabytes of storage on the desk.
Just not a good idea to change your buying habits on unconfirmed rumor, especially when your alternatives suffer from the same problem, or one close to it.
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