Plodding PC sales weigh down Microsoft profit

 

Waiting for Windows 8?

Microsoft is starting the new year much as it did the one just ended - grappling with weak computer sales tearing a hole in its core Windows business, while it gropes its way slowly into the faster-growing mobile phone and tablet markets.

Shares of the world's largest software company are pretty much where they were a year ago too, and few expect much to change after the latest results are announced on Thursday.

"(It is) clear that investors will continue to need to be patient," Barclays Capital analyst Raimo Lenschow said in a research note last week.

"There could be positive short-term momentum ... but we first need to see proper evidence of mobile/tablet success rather than just signs of hope."

Microsoft, which just wrapped up its last Consumer Electronics Show, gave a taste of the tough times it is facing last week.

Speaking with analysts, the head of marketing for the Windows unit flagged the most recent decline in PC sales and warned that the floods in Thailand disrupting crucial disk-drive shipments would put a drag on numbers for a while, making sales hard to foresee.

"I just think it's going to take a couple of quarters to work itself out," said Tami Reller, speaking about the effect of the shortages. "It would be naive to believe otherwise. The level in each of the quarters, I think that's hard to exactly predict."

Reller's cautious outlook was confirmed by industry numbers released a day after, when Gartner reported a 1.4 percent decline in global PC sales for the fourth quarter. The research firm predicted that the disk-drive shortages would be most felt in the first half of this year.

More worryingly for Microsoft, Gartner noted "continuously low consumer PC demand" over the normally buoyant holiday shopping season in the United States, and a lack of excitement so far over the newest lightweight laptops championed by Intel Corp .

That's bad news for Microsoft, whose financial success is still closely bound to computer sales, despite its forays into gaming, servers, Internet search and phones.

Wall Street expects sales of $US20.9 billion for the fiscal second quarter - which would be a 5 percent increase from a year ago and its biggest quarterly sales on record - but a net profit of only 76 cents per share, a slight dip from 77 cents last year.

Microsoft's shares have moved higher in the past six weeks - as they often do before earnings - but they tend to fall after its numbers are released.

The stock has fluctuated aimlessly between $US23 and $US29 since May 2010, the last time they topped $US30, despite hitting sales records and increases in the dividend.

Pointing to the stock's 9.7 price to earnings ratio - just over half its 10-year average - most Wall Street analysts have 'buy' ratings on the stock and target prices in the $US30s.

But the good news that is meant to propel the stock afresh never arrives.

The latest hopes are pinned on Microsoft's new phones - pushed aggressively at CES last week - and on Windows 8 later this year.

Chief Executive Steve Ballmer was very visible at CES, jumping from one place to the next promoting phones that use the latest Windows software. Nokia's Lumia 900 looked slick and attracted a lot of attention.

The Lumia 900 in the United States will have a front-facing camera and work on wireless firms' new high-speed networks, said Bill Koefoed, Microsoft's head of investor relations at CES. "We will put plenty of marketing muscle behind it," he said.

However, no date was set for its US launch with AT&T . Likewise, Microsoft would not be tempted into announcing any release date for the mobile-friendly, touch-enabled Windows 8, which will provide its entry into the exploding tablet market.

All the company has said is that a beta test version will come out in February, which generally means a full release is at least six months down the road from there.

Some industry watchers forecast that machines running Windows 8 will not be on sale until early 2013, by which time Apple Inc's iPad will have almost three years' head start.

(Editing by Dale Hudson)


Plodding PC sales weigh down Microsoft profit
 
 
 
Top Stories
Coalition's NBN cost-benefit study finds in favour of MTM
FTTP costs too much, would take too long.
 
Who'd have picked a BlackBerry for the Internet of Things?
[Blog] BlackBerry has a more secure future in the physical world.
 
Will Nutanix be outflanked before reaching IPO?
VMware muscles in on storage startup in hyper-converged infrastructure.
 
 
Sign up to receive iTnews email bulletins
   FOLLOW US...
Latest articles on BIT Latest Articles from BIT
Looking for storage? Seagate has five new small business NAS devices
Aug 22, 2014
Seagate has announced a new portfolio of Networked Attached Storage (NAS) solutions specifically ...
Run a small business in western Sydney?
Aug 15, 2014
This event might be of interest if you're looking to meet other people with a similar interest ...
Buying a tablet? Microsoft's Surface Pro 3 goes on sale this month
Aug 8, 2014
Microsoft has announced its Surface Pro 3 will go on sale in Australia on 28 August from ...
Apple's top MacBook Pro with Retina is now cheaper
Aug 1, 2014
Apple has updated its MacBook Pro range with faster processors and new pricing, including ...
Pass on carbon tax savings, warns ACCC
Jul 24, 2014
The ACCC is warning businesses that supply "regulated goods" to pass on any cost savings ...
Latest Comments
Polls
Which is the most prevalent cyber attack method your organisation faces?




   |   View results
Phishing and social engineering
  69%
 
Advanced persistent threats
  3%
 
Unpatched or unsupported software vulnerabilities
  11%
 
Denial of service attacks
  7%
 
Insider threats
  11%
TOTAL VOTES: 629

Vote