A Gartner report released earlier this month indicated that worldwide PC shipments fell 0.1% over the year to 87.5 million units in the second quarter of this year. This was the seventh consecutive quarter of flat to single-digit growth. Gartner believes that growing consumer interest in smartphones and media tablets is responsible for the declining PC sales.
Microsoft (NASDAQ:MSFT) is countering the trend of declining PC sales by rolling out other offerings. In the results announced last week, Q4 revenues grew 7% over the year to $18.6 billion, ahead of the market’s projections of $18.2 billion. EPS of $0.73 was also ahead of the Street’s target of $0.62. On a GAAP basis, however, during this quarter, Microsoft reported its first ever loss since it went public because of the failed acquisition of aQuantive. Including the write-off, the company would have suffered a loss of $0.06 per share.
By segment, Business division revenues grew 7.1% over the year to $6.3 billion. Windows and Windows Live revenues fell 1% over the year to $4.15 billion as consumers preferred to wait for Microsoft’s upgraded version, expected later this year. Server & Tools revenues grew 13% over the year to $5.09 billion and Entertainment and Devices revenues grew 20% to $1.79 billion. Revenues from the company’s online services grew 8% over the year to $0.74 billion.
Microsoft ended the year with revenues growing 6% over the year to $74.26 billion. EPS for the year grew 5% to $2.78.
Microsoft is challenging Apple and is “not going to leave any space uncovered to Apple.” It announced plans to launch its tablet, called Surface.
Microsoft is making both the hardware and software for Surface – a move that has not gone over well with the other hardware manufacturers who will become their competitors in the space. Microsoft also kept the news about the product a secret from its other computer hardware partners.
The Surface is a 9-millimeter thick, 1.5 pound tablet that will be launched in October. The product will be available in two versions, one to run on low-power ARM chips and another to run on an Intel chip. Reviewers believe that the product is beautiful and sturdier as it comes with a built-in kickstand, a cover that not only locks firmly but also acts as a proper keyboard. Analysts believe that Microsoft is making a bold move by launching its own tablet instead of licensing out its software to other computer hardware manufacturers.
A Major Acquisition in Social Networking
Microsoft is also expanding its offerings through multiple acquisitions. Recently, they acquired a provider of enterprise social networks, Yammer, for an estimated $1.2 billion. Yammer was founded in 2008 to provide secure social networking services to organizations. At the time of the acquisition, Yammer had more than 5 million corporate users and a customer list of nearly 85% of the Fortune 500 list. Microsoft will continue to offer Yammer as a stand-alone product and will also integrate it with its enterprise collaboration products, including SharePoint, Office, and Lync.
Earlier this month, it announced plans to acquire touchscreen technology company Perceptive Pixel. Perceptive Pixel manufactures multi-touch interface provider for workstations and walls. Microsoft plans to combine Perceptive’s technology with hardware from its OEMs to offer powerful Windows 8–based PCs.
The company’s cloud services are also performing very well. According to its data, Windows Azure now stores more than 4 trillion objects, compared with fewer than one trillion reported a year ago. It claims that Windows Azure Storage processes an average of 270,000 requests per second, and has peaks of as many as 880,000 requests per second.
Microsoft is expecting this growth rate to continue. Its sharper focus on the segment helped lower the cost of Azure Storage transactions last month. Recently, it also added several new features to Azure, including Locally Redundant Storage, Geo Redundant Storage, and Azure Virtual Machines that are stored as objects in Azure Storage.
As I have said earlier, this is a crucial year for Microsoft. The company is counting on the success of several of its products. The stock is trading at $29.15 with a market capitalization of $244.31 billion. It touched a 52-week high of $32.95 in March 2012.