Not that you'd know reading the Microsoft earnings release, but MSFT had a weak quarter, posting it's lowest growth Q4 in ten years (according to GigaOM).
Profit in Q4 declined to $2.6B from $3.6B in Q4 2005.
MSFT was quick to blame Vista slippage, and point to deferral of $1.6B(!) in revenue as the reason for the weak quarter. Be that as it may, Microsoft has a few key structural issues - namely their businesses besides Windows, Servers and Office:
- Online / MSN loses money
- Xbox loses money ($300M last quarter on $3B in revenue)
Those are supposed to be the growth areas. At least in the conf calls, they do realize their complete and utter failure up to this point in search.
"On the search side you are correct we lost market share," Microsoft CFO Chris Liddell said in response to an analyst's question on the company's earnings conference call. He said he is "clearly not happy with that."
Not only is search share declining, but revenue per search (RPS) has GONE DOWN from what they used to get with Overture! In other words, their launch of adCenter has resulted in WORSE RPS than Yahoo's old Overture system. That's bad, especially since Yahoo has moved on to Panama, and expects improvements in RPS this year.
Microsoft's plight makes Yahoo look like Google in comparison...
Despite all the talk about "long-term investment", Microsoft has lost in search. They will never catch up. Google understood this phenomenon with YouTube, realizing they had to buy it, because Google Video would never be able to catch it with traffic growth. Search may not be as social or viral as YouTube, but it is self-reinforcing enough that with a 10% to 60% share difference Microsoft won't catch Google. BTW, search isn't over, but I am saying Microsoft has lost.
Seriously, if you ever want to be depressed about the nature of giant tech companies, just go read MiniMSFT and MSFTextrememakeover, both are insider blogs.
MiniMSFT covers the HR issues and management debacles, while MSFTextrememakeover is a bit more financial oriented - for example, you'll learn how Microsoft has lost around $5B on Xbox over the years..
Depressing.
¶ 1/25/2007
