When you’ve just made your first loss in 26 years, a loss of almost half a billion dollars at that, it would seem trouble is afoot. In Microsoft’s case, however, nothing could be further from the truth. The Beast of Redmond has risen from its slumber and with a renewed appetite to consume all around it.
Lies, Damn Lies and Statistics
Look away from the headline dip into the red and Microsoft’s Q4 figures are remarkable. It had record revenue ($18.06bn), a 12 per cent rise in operating income (to $6.93bn), a 30 per cent jump in net income (to $5.87bn), a 20 per cent increase in its entertainment and devices’ division and a 15 per cent year-on-year increase in Xbox Live subscriptions. So where did the loss come from? A whopping $6.2bn one-off write down from its failed 2007 record purchase of aQuantive in 2007 – an Internet advertising firm it believed would see it rival Google’s online ads.
As such ignore the aQuantive anomaly and an entirely different picture of Microsoft’s business begins to form, one that is even more impressive considering ”when” it has happened…
The Generational Lull
Right now Microsoft should be stagnating badly. Windows 7 sales are trailing off with Windows 8 confirmed for October, Windows Phone sales should be catatonic after Windows Phone 8 was confirmed to be incompatible with every existing WP7 handset and the aged Xbox 360 recently had its seventh birthday with the follow up ‘Xbox 720‘ expected to arrive next year. The company also hasn’t got a competitive tablet on the market, in an app-obsessed world Windows Marketplace lags well behind rivals and even one of its greatest weapons, Microsoft Office, is two years old and looks set to cede to Apple and Google with iOS and Android versions coming in November.
And yet Microsoft is turning in record revenue figures. Furthermore it is achieving them during the most radical shake-up in the company’s 37 year history and before any of the key products coming from it have hit the market. Much like the shake-up, all these products are bold, all contain huge risks and all are potentially game changers.
Windows Saving Windows Phone
Despite the obsession with all things mobile, the key for this new Microsoft is Windows 8. The company still maintains a near 90 per cent hold of the personal computer space and with £1,800 Retina Display MacBooks reinforcing that Apple doesn’t care about the mass market this is where Microsoft can fight back largely uncontested. Microsoft knows this and as such has dived head first (and possibly a generation earlier than it would’ve liked) into the Metro UI. By making PC owners use Metro, whether they like it or not, Microsoft is force feeding billions of people instant familiarity with its mobile products. That strange sense of alienation when picking up a Windows Phone will be gone.