7 ms·

Microsoft profit jumps 51 percent with record Q1 revenue

72 points by arst 16y ago

andrewljohnson 16y ago
Everyone who talks about the death of Microsoft and their lack of innovation has never met any Microsoft engineers. The culture may be suffering a malaise right now, but they have a lot of money, and a lot of talented people. And they seem to be making many violent changes as we move away from the Windows/Office hegemony years, which is clearly the right strategy. They may never have the robot-cars culture of Google, but they will always have a great-software culture.
- face 16y ago
  I have met some of their engineers. There is a lot of bureaucracy and politics. There is innovation (microsoft research is great), but, considering their resources, it is not really all that impressive. I've met some sharp developers, but, also a lot of very mediocre software engineers that are cogs in a giant machine.
- lowglow 16y ago
  But what is any culture worth if it is so poorly lead? In my mind Microsoft is only still competitive because it has had such great sustained momentum from its past growth. It really isn't pushing the envelope anywhere. It also managed to kill the most exciting product that we've seen from them in a very long time : The Courier. I sold my stock a while back and this current rally seems like a swan song.
  - kenjackson 16y ago
    "It really isn't pushing the envelope anywhere." I think quite the opposite. They're pushing the envelope nearly everywhere. But you don't make money by pushing the envelope. It's by finding what customers want to spend money on. The iPod wasn't pushing the envelope. But it was sexy. Courier was sexy, but not realistic. I say Kinect is their most exciting product.
    - muhfuhkuh 16y ago
      But isn't the kinect the Wii360?
      - kenjackson 16y ago
        There's no such as the Wii360. Can you restate your question more clearly?
  - yesimahuman 16y ago
    Are you an Xbox user? I know they take a big loss from that sector, but they have huge potential in that area. As one of the few devices that can run amazing games and feature growing amounts of non-gaming content, I think that will be very successful for them down the line. Why buy other set top boxes if I can get all of their functionality plus amazing games at the same time?
    - Encosia 16y ago
      The Xbox has been generating a yearly profit since about 2008. Still a net loss since inception, but it is turning a profit now.
    - lowglow 16y ago
      I am an xbox user. Sure, there is potential but I can't put weight into potential alone.
- seldo 16y ago
  Yahoo has a ton of cash and an army of really great, smart people who want the company to do well, but after 4 years there I was forced to conclude that the ship could not be turned around. I imagine that Microsoft is the same.
  - palish 16y ago
    I'd love to hear more about your experiences.
    - seldo 16y ago
      Is that sarcasm? I feel like "<x> was <this way> at Yahoo" is pretty much all I ever talk about here :-)
      - Shamiq 16y ago
        I believe he was being sincere. Perhaps something a bit more analytical and introspective with regards to the company?
        seldo 16y ago
        Well, since you both asked... I joined Yahoo in the Mobile division soon after the Flickr and Delicious acquisitions, when it looked like Yahoo had grasped the importance of including social elements and user-generated content into its experiences. Fundamentally Yahoo is an advertising company that failed to understand the value of self-serve, long-tail advertising. It preferred the high-margin, high-touch sales approach with big media customers that had kept them alive through the first dot-com crash. Fair play to them: clinging hard to those media dollars was absolutely the right move for survival. But they missed the boat and, critically, failed to acquire Google for $1bn -- something that Semel seriously discussed with Page and Brin sometime around 2002. The next-best thing after failing to buy Google is create their own. They did this by buying Overture and Inktomi, which together became the core of the post-Google Yahoo Search (remember, search on Yahoo was powered by Google until 2004). In terms of search accuracy, Yahoo had roughly matched Google by around 2006, but on the monetization side their algorithmic yield-optimization for keyword ads was awful compared to Google, and despite massive engineering investment remained so until they got out of the game by selling to Microsoft in 2009/10 (not that Microsoft is much better at that, I hear). If you accepted that they had missed the boat on self-serve keyword advertising (which internally nobody ever did), the next-best thing they could do was massively increase page impressions by creating a blockbuster, high-page-view, sticky product. This would maximize the value of their still-excellent display ad business. By 2003/4, it was clear that social networks, like Friendster and relative newcomer MySpace, were exactly that kind of product. Here again, an acquisition would have been smart (though less obviously smart than Google). Instead Yahoo tried to get into the game with Yahoo 360, a home-grown social network. This was at least the right strategy, but here again they simply failed on execution. 360 was buggy, ugly, confusing and lacked activity streams, which turned out to be a key feature of Facebook's subsequent success. No bones about it here: they had a gigantic number of users they could drive to 360 from the front page. If 360 had been at all compelling, they could have dominated social networking overnight. So, four major failures behind them, in 2008 they saw the huge success of Facebook and tried to turn social: thus came YOS, the Yahoo Open Strategy. This included new Yahoo Profiles (a second attempt at social networking), and YAP, the Yahoo Application Platform, the last product I worked on before leaving. YAP was supposed to be a sort of cross between Google App Engine and Facebook Apps, where we would simultaneously distribute your app via our social streams and scale it on our infrastructure. This was a brilliant idea, I still think. But the execution was a clusterfuck from start to finish, the gory details of which I'll skip. The final product was nothing like the original idea, and ended up a half-assed knockoff of Facebook Apps, but without any kind of traction. And in the meantime, it turned out Facebook Apps were a flash in the pan and Facebook had pivoted to Facebook Connect. So that's my four years at Yahoo: missing one big opportunity after the other, despite multiple swings of the bat. It's not that we couldn't see what needed to be done. We just couldn't, organizationally, move fast enough and bravely enough to get anything good out the door before somebody else ate our lunch. And I didn't see that changing any time soon, so I left. Which is a shame, because I really love Yahoo. It's a good-hearted, fun company, good to its employees, and full of people who genuinely care about our users and building great things that improve people's lives and make money at the same time. But sclerotic management and organization seems to have doomed it permanently to mediocrity. It's not going to die, but it will continue to lose relevance. [To my fellow Yahoos who read HN: I hope you don't think this is too harsh. I love you guys!]
- jdp23 16y ago
  The culture's been suffering malaise for years. Even back in 2005 all the executives acknowledged the problem (I had a great 1-1 with Ballmer about it) but it's very difficult to actually change anything. So a lot of talented and passionate people there are frustrated, burnt out, or looking elsewhere. Windows and Office have the power at the top (since after all they contribute the bulk of the revenue and profits) which creates huge inertia and makes the company as a whole very backward looking. Of course, it's not to late to recover: they've got huge assets, and Windows and Office have a few more years to run. But so far the progress hasn't been anywhere near what's needed ...
- cubicle67 16y ago
  Here's my example of their great software from only an hour ago: Installed MS Office for someone on their Mac, then said yes to checking for updates. The updater ran, downloaded 2 updates and then told me it to please quite the following programmes before it could continue. List of programmes was everything running at that time, including the updater itself.
- loewenskind 16y ago
  >Everyone who talks about the death of Xerox PARC has never met any Xerox PARC engineers. It takes more than money and good people to avoid "death".
mjfern 16y ago
Despite today's news about Microsoft's record Q1 revenue, I'm concerned about the company's long-term prospects in computing. Looking at Microsoft’s recent annual report, filed on June 30, 2010, Microsoft generated 83% of its revenues and 98% of its profits from the following three divisions: Windows & Windows Live, Microsoft Business Division, and Server and Tools. While these divisions include a collection of products and services (e.g., Azure), it appears that most of the revenues and almost all the profits of these divisions is driven by Windows (desktop and server) and Microsoft Office. Its remaining two divisions – Online Services and Entertainment & Devices – encompass all of the company’s consumer products outside of Windows and Office, such as the Xbox 360, Bing, Windows Mobile, and Zune. In 2010, these two divisions accounted for the remaining 17% of Microsoft’s revenues, and had a collective operating loss of $1.676b. In fact, between 2008 and 2010, these two consumer-focused divisions generated an aggregate of $3.353b in operating losses. Looking across its five divisions, we can conclude that Microsoft generates a majority of its revenues and nearly all of its profits from Windows and Office. And while Microsoft has found some success with other enterprise products (e.g., SharePoint, Microsoft SQL Server, and services), its consumer strategy, outside of Windows and Office, is struggling. From my vantage point, the two key questions for Microsoft are: 1. In what timeframe will Microsoft face downward pressure on its Windows and Office revenues and profitability, given the transition from desktop computing to thin devices and cloud services? 2. Can Microsoft develop and execute a corporate strategy in the consumer or enterprise markets, outside its stronghold of desktop computing? And will this strategy substantially compensate for any disruption in its core market of desktop computing? My sense is that the transition from desktops to cloud services and thin devices is accelerating due to rapid innovation and growing competition among Amazon, Apple, Facebook, Google, Netflix, Salesforce.com and others. Further, Microsoft has thus far underperformed in cloud services and thin devices, from search (Bing) to smart phones (Windows Mobile). In view of Microsoft’s dependency on Windows and Office, and its inability to gain significant share in newer growth markets, I am concerned about its long-term prospects in computing.
- wilschroter 16y ago
  I think you may be considerably overlooking the amount of integration Microsoft has into both the personal mindset of consumers as well as the enterprise. While they may in fact go the way of IBM and become less relevant over time, I wouldn't overlook the fact that they have remained on top in many categories over many sea changes. I don't know that the other companies you mention have demonstrated their staying power (Apple circa 1992 was not exactly "on top")
jnagro 16y ago
i believe their consumer profits are not what they used to be, this money is from companies buying W7 after not buying Vista - delayed upgrades. http://bit.ly/aA1u4l http://bit.ly/aA1u4l
- Devilboy 16y ago
  http://money.cnn.com/2010/10/27/technology/microsoft_pdc/index.htm?cnn=yes&hpt=T2 http://money.cnn.com/2010/10/27/technology/microsoft_pdc/ind...
deleted 16y ago
[deleted]
jerryrreynolds 16y ago
Didn't I see some absurd article a couple says ago on here that said "Microsoft is a dying consumer brand"? You have to see what Microsoft is doing with its BizSpark Program! Microsoft has eyes everywhere and you never know when one of these small companies will be the next Expedia. Let me just say, I am proud that my company Flockall is a member of BizSpark!
gamble 16y ago
This is also the first quarter where Apple's revenue was larger than Microsoft's: http://www.appleinsider.com/articles/10/10/28/apple_beats_microsoft_in_fall_quarterly_earnings.html http://www.appleinsider.com/articles/10/10/28/apple_beats_mi... Microsoft is still more profitable, for the moment.

72 points by arst 16y ago

Everyone who talks about the death of Microsoft and their lack of innovation has never met any Microsoft engineers. The culture may be suffering a malaise right now, but they have a lot of money, and a lot of talented people. And they seem to be making many violent changes as we move away from the Windows/Office hegemony years, which is clearly the right strategy. They may never have the robot-cars culture of Google, but they will always have a great-software culture.

face 16y ago
I have met some of their engineers. There is a lot of bureaucracy and politics. There is innovation (microsoft research is great), but, considering their resources, it is not really all that impressive. I've met some sharp developers, but, also a lot of very mediocre software engineers that are cogs in a giant machine.
lowglow 16y ago
But what is any culture worth if it is so poorly lead? In my mind Microsoft is only still competitive because it has had such great sustained momentum from its past growth. It really isn't pushing the envelope anywhere. It also managed to kill the most exciting product that we've seen from them in a very long time : The Courier. I sold my stock a while back and this current rally seems like a swan song.
- kenjackson 16y ago
  "It really isn't pushing the envelope anywhere." I think quite the opposite. They're pushing the envelope nearly everywhere. But you don't make money by pushing the envelope. It's by finding what customers want to spend money on. The iPod wasn't pushing the envelope. But it was sexy. Courier was sexy, but not realistic. I say Kinect is their most exciting product.
  - muhfuhkuh 16y ago
    But isn't the kinect the Wii360?
    - kenjackson 16y ago
      There's no such as the Wii360. Can you restate your question more clearly?
- yesimahuman 16y ago
  Are you an Xbox user? I know they take a big loss from that sector, but they have huge potential in that area. As one of the few devices that can run amazing games and feature growing amounts of non-gaming content, I think that will be very successful for them down the line. Why buy other set top boxes if I can get all of their functionality plus amazing games at the same time?
  - Encosia 16y ago
    The Xbox has been generating a yearly profit since about 2008. Still a net loss since inception, but it is turning a profit now.
  - lowglow 16y ago
    I am an xbox user. Sure, there is potential but I can't put weight into potential alone.
seldo 16y ago
Yahoo has a ton of cash and an army of really great, smart people who want the company to do well, but after 4 years there I was forced to conclude that the ship could not be turned around. I imagine that Microsoft is the same.
- palish 16y ago
  I'd love to hear more about your experiences.
  - seldo 16y ago
    Is that sarcasm? I feel like "<x> was <this way> at Yahoo" is pretty much all I ever talk about here :-)
    - Shamiq 16y ago
      I believe he was being sincere. Perhaps something a bit more analytical and introspective with regards to the company?
      - seldo 16y ago
        Well, since you both asked... I joined Yahoo in the Mobile division soon after the Flickr and Delicious acquisitions, when it looked like Yahoo had grasped the importance of including social elements and user-generated content into its experiences. Fundamentally Yahoo is an advertising company that failed to understand the value of self-serve, long-tail advertising. It preferred the high-margin, high-touch sales approach with big media customers that had kept them alive through the first dot-com crash. Fair play to them: clinging hard to those media dollars was absolutely the right move for survival. But they missed the boat and, critically, failed to acquire Google for $1bn -- something that Semel seriously discussed with Page and Brin sometime around 2002. The next-best thing after failing to buy Google is create their own. They did this by buying Overture and Inktomi, which together became the core of the post-Google Yahoo Search (remember, search on Yahoo was powered by Google until 2004). In terms of search accuracy, Yahoo had roughly matched Google by around 2006, but on the monetization side their algorithmic yield-optimization for keyword ads was awful compared to Google, and despite massive engineering investment remained so until they got out of the game by selling to Microsoft in 2009/10 (not that Microsoft is much better at that, I hear). If you accepted that they had missed the boat on self-serve keyword advertising (which internally nobody ever did), the next-best thing they could do was massively increase page impressions by creating a blockbuster, high-page-view, sticky product. This would maximize the value of their still-excellent display ad business. By 2003/4, it was clear that social networks, like Friendster and relative newcomer MySpace, were exactly that kind of product. Here again, an acquisition would have been smart (though less obviously smart than Google). Instead Yahoo tried to get into the game with Yahoo 360, a home-grown social network. This was at least the right strategy, but here again they simply failed on execution. 360 was buggy, ugly, confusing and lacked activity streams, which turned out to be a key feature of Facebook's subsequent success. No bones about it here: they had a gigantic number of users they could drive to 360 from the front page. If 360 had been at all compelling, they could have dominated social networking overnight. So, four major failures behind them, in 2008 they saw the huge success of Facebook and tried to turn social: thus came YOS, the Yahoo Open Strategy. This included new Yahoo Profiles (a second attempt at social networking), and YAP, the Yahoo Application Platform, the last product I worked on before leaving. YAP was supposed to be a sort of cross between Google App Engine and Facebook Apps, where we would simultaneously distribute your app via our social streams and scale it on our infrastructure. This was a brilliant idea, I still think. But the execution was a clusterfuck from start to finish, the gory details of which I'll skip. The final product was nothing like the original idea, and ended up a half-assed knockoff of Facebook Apps, but without any kind of traction. And in the meantime, it turned out Facebook Apps were a flash in the pan and Facebook had pivoted to Facebook Connect. So that's my four years at Yahoo: missing one big opportunity after the other, despite multiple swings of the bat. It's not that we couldn't see what needed to be done. We just couldn't, organizationally, move fast enough and bravely enough to get anything good out the door before somebody else ate our lunch. And I didn't see that changing any time soon, so I left. Which is a shame, because I really love Yahoo. It's a good-hearted, fun company, good to its employees, and full of people who genuinely care about our users and building great things that improve people's lives and make money at the same time. But sclerotic management and organization seems to have doomed it permanently to mediocrity. It's not going to die, but it will continue to lose relevance. [To my fellow Yahoos who read HN: I hope you don't think this is too harsh. I love you guys!]
jdp23 16y ago
The culture's been suffering malaise for years. Even back in 2005 all the executives acknowledged the problem (I had a great 1-1 with Ballmer about it) but it's very difficult to actually change anything. So a lot of talented and passionate people there are frustrated, burnt out, or looking elsewhere. Windows and Office have the power at the top (since after all they contribute the bulk of the revenue and profits) which creates huge inertia and makes the company as a whole very backward looking. Of course, it's not to late to recover: they've got huge assets, and Windows and Office have a few more years to run. But so far the progress hasn't been anywhere near what's needed ...
cubicle67 16y ago
Here's my example of their great software from only an hour ago: Installed MS Office for someone on their Mac, then said yes to checking for updates. The updater ran, downloaded 2 updates and then told me it to please quite the following programmes before it could continue. List of programmes was everything running at that time, including the updater itself.
loewenskind 16y ago
>Everyone who talks about the death of Xerox PARC has never met any Xerox PARC engineers. It takes more than money and good people to avoid "death".

mjfern 16y ago

Despite today's news about Microsoft's record Q1 revenue, I'm concerned about the company's long-term prospects in computing. Looking at Microsoft’s recent annual report, filed on June 30, 2010, Microsoft generated 83% of its revenues and 98% of its profits from the following three divisions: Windows & Windows Live, Microsoft Business Division, and Server and Tools. While these divisions include a collection of products and services (e.g., Azure), it appears that most of the revenues and almost all the profits of these divisions is driven by Windows (desktop and server) and Microsoft Office. Its remaining two divisions – Online Services and Entertainment & Devices – encompass all of the company’s consumer products outside of Windows and Office, such as the Xbox 360, Bing, Windows Mobile, and Zune. In 2010, these two divisions accounted for the remaining 17% of Microsoft’s revenues, and had a collective operating loss of $1.676b. In fact, between 2008 and 2010, these two consumer-focused divisions generated an aggregate of $3.353b in operating losses. Looking across its five divisions, we can conclude that Microsoft generates a majority of its revenues and nearly all of its profits from Windows and Office. And while Microsoft has found some success with other enterprise products (e.g., SharePoint, Microsoft SQL Server, and services), its consumer strategy, outside of Windows and Office, is struggling. From my vantage point, the two key questions for Microsoft are: 1. In what timeframe will Microsoft face downward pressure on its Windows and Office revenues and profitability, given the transition from desktop computing to thin devices and cloud services? 2. Can Microsoft develop and execute a corporate strategy in the consumer or enterprise markets, outside its stronghold of desktop computing? And will this strategy substantially compensate for any disruption in its core market of desktop computing? My sense is that the transition from desktops to cloud services and thin devices is accelerating due to rapid innovation and growing competition among Amazon, Apple, Facebook, Google, Netflix, Salesforce.com and others. Further, Microsoft has thus far underperformed in cloud services and thin devices, from search (Bing) to smart phones (Windows Mobile). In view of Microsoft’s dependency on Windows and Office, and its inability to gain significant share in newer growth markets, I am concerned about its long-term prospects in computing.

wilschroter 16y ago
I think you may be considerably overlooking the amount of integration Microsoft has into both the personal mindset of consumers as well as the enterprise. While they may in fact go the way of IBM and become less relevant over time, I wouldn't overlook the fact that they have remained on top in many categories over many sea changes. I don't know that the other companies you mention have demonstrated their staying power (Apple circa 1992 was not exactly "on top")

jnagro 16y ago

i believe their consumer profits are not what they used to be, this money is from companies buying W7 after not buying Vista - delayed upgrades. http://bit.ly/aA1u4l http://bit.ly/aA1u4l

Devilboy 16y ago
http://money.cnn.com/2010/10/27/technology/microsoft_pdc/index.htm?cnn=yes&hpt=T2 http://money.cnn.com/2010/10/27/technology/microsoft_pdc/ind...

deleted 16y ago

[deleted]

jerryrreynolds 16y ago

Didn't I see some absurd article a couple says ago on here that said "Microsoft is a dying consumer brand"? You have to see what Microsoft is doing with its BizSpark Program! Microsoft has eyes everywhere and you never know when one of these small companies will be the next Expedia. Let me just say, I am proud that my company Flockall is a member of BizSpark!

gamble 16y ago

This is also the first quarter where Apple's revenue was larger than Microsoft's: http://www.appleinsider.com/articles/10/10/28/apple_beats_microsoft_in_fall_quarterly_earnings.html http://www.appleinsider.com/articles/10/10/28/apple_beats_mi... Microsoft is still more profitable, for the moment.