Great Microsoft Quarter Fuelled by Halo, Business Spending, etc.

Great quarter from Microsoft today. It was a beat-and-raise quarter, with everywhere you look across the software company’s product lines it posted impressive growth. The results were better than I figured Microsoft would put up — and better than Microsoft expected: it conceded on the on the call that PC growth came in almost 5 points ahead of where it expected — despite have been convinced some time ago that MSFT would do well on the back of Halo, improved business IT spending, etc.

I remain a Vista skeptic, of course. But that’s not the same thing as saying that businesses won’t plod along in lockstep buying the thing, even if consumers aren’t jumping up and driving adoption the way they did for Windows 95. What’s the alternative for business? A wholesale change to Mac? A shift to Linux? Be serious; won’t happen.

The sole lowlight, now that even the entertainment business found a way to profits for at least one quarter, was online. While delivering 25% revenue growth, it lost $264-million in the quarter.
The rest of the business is, in effect, subsidizing Microsoft’s quest to get 25% of its business tied to advertising over the next few years, and so both the top- and bottom-line figures in this part of the business will be the ones to watch.

I still wish Microsoft would have followed my advice a long time ago and separated the (supposed) growth and the annuity businesses — because Microsoft is worth more in parts than as a whole — but it’s definitely motoring right now in its legacy business as a beneficiary of an upturn in business IT spending.


  1. I think the reason we feel surprised by Microsoft’s PC growth is that despite the fact that Linux and Mac are short-term unrealistic (as you write), we can actually already see the trajectory, that actually, Macs and Linux *are* getting more popular, and Windows a thing we’re increasingly less able to take for granted as a “default.” (And of course, web-based stuff is the main threat for Windows, above any competitor OS).
    So anyway, we can see the writing on the wall, certain things just seem inevitable. But then things like yesterday’s MS numbers come out and we’re reminded that though this shift is happening, it’s via a gradual attrition, not an immediate displacement.
    I guess what I’m saying is that MS can still be a smart stock to own, *and* a bad technology to a invest in 😀