An often irreverent look at some of this week's other news ...

Microsoft Earnings: Software Giant Beats All Estimates

There's going to be a lot of information about Microsoft's most recent quarterly financial results today, as they were announced last night. First up: Microsoft blew past all estimates by earning a net income of $6.63 billion on revenues of $19.95 billion. It's mostly (very) good news: The profit and revenue figures are both records, and Microsoft's earnings per share of 77 cents were well above the estimate of 69 cents per share. Microsoft's quarterly profit was also higher than that of Apple, allowing the software giant to fend off another, possibly inevitable, milestone that many were expecting.

Microsoft Earnings: Strong Consumer Sales During Holidays, For a Change

Microsoft credited strong sales of new consumer products—primarily the Kinect add-on for the Xbox 360—for the strong showing, along with 55 percent growth in the Entertainment and Devices Division that makes those products. In fact, Microsoft tried to push the consumer thing pretty hard, noting that Office 2010 was "the fastest-selling consumer version of Office in history," among other things. But the software giant can't hide one simple truth: Even during the holiday selling season, approximately 20 percent of its revenues come from business products—not consumer products. Actually, consumer sales of PCs nose-dived in the quarter, falling well short of their Q4 2009 levels. If it weren't for business PC sales, overall growth there would have been negative.

Microsoft Earnings: Windows 7 Is Huge

As part of its earnings release, Microsoft announced that it has now sold 300 million copies of Windows 7, and that this latest OS version is now installed on over 20 percent of all computers connected to the Internet. Although it's true that the mainstream computing market is slowly moving to smaller, lighter, and more mobile devices based on non-traditional computing platforms (iOS, Android, and so on), this is incredibly impressive. I mean, how many copies of Mac OS X has Apple sold since October 2009? The company sold about 16.6 million Macs in that time period, and even if we hand the company another 50 percent of that as padding for retail sales of the OS, we're looking at Windows 7 outselling Mac OS X by a factor of 12-to-1. Not bad.

Microsoft Earnings: Looking for Controversial Headline, Analysts Miss the Mark, Again

Speaking of which, one of the interesting tidbits in Microsoft's earnings release was that year-over-year sales of Windows 7 rose only 5 percent, causing some of the more clueless analysts out there to go into absurd Chicken Little routines. "When you delve into the numbers, Windows missed expectations by $300 million," one analyst who shall not be named claimed. Except that Microsoft's year-ago numbers for Windows 7 were actually padded by deferred revenues from Windows 7 presales. Take out the presale numbers and—ta da!—Windows 7 sales actually increased 15 percent year-over-year, or by $1.7 billion in revenues. Do a bit of math, and you discover that the net profit difference is actually positive. So, even in a quarter in which consumer PC sales slowed, Microsoft grew Windows 7 sales by a pretty decent amount. Or, in the words of one analyst who can do simple math and isn't interested in silly headlines: "We've gotten over 300 million Windows 7 licenses sold," BGC Financial's Colin Gillis said. "I mean, PCs are not disappearing. Put that into perspective with 7 million tablets sold last quarter from Apple." Yes, please do put that in perspective.

Microsoft Earnings: At Microsoft, It's All About Businesses, Businesses, Businesses

Given that the holiday selling season just ended, Microsoft is interested in pushing the consumer angle and the success of fun products like Kinect and Xbox 360 (which, when you think about it, are really just a single product). But the reality of Microsoft's earnings, even in the holiday quarter, shouldn't be understated: Microsoft makes most of its money selling software products to businesses and business users—not to consumers. And even among sales to so-called consumers, most of those sales are really of its business-oriented products, like Office. Looking at Microsoft's only mostly-consumer-oriented division, Entertainment and Devices, we see a profit of $679 million on revenues of $3.7 billion. So this division earned 18.5 percent of the company's revenues during a quarter in which it should be expected to outperform, but only 10 percent of its profits. Does the word "spin-off" sound about right to anyone else? A separate Xbox company could be a big, big deal. And can you imagine how big Xbox would be right now if Microsoft had just fixed the console (with that new S revision) a year or two earlier? My goodness.

Microsoft Earnings: Where Is Windows Phone?

Microsoft revealed recently that it sold more than 2 million copies of its Windows Phone 7 OS to device makers in the previous quarter, but the company declined to discuss this important new platform in its earnings release in any material way, and in fact neglected to even cite the "2 million" figure for some reason. What the software giant revealed was that it launched Windows Phone during the quarter in 30 countries and on 60 operators and nine different devices. The company also noted that developers are adding new Windows Phone 7 applications to the marketplace at a rate of over 100 per day. And that was it.

Microsoft Earnings: Tablets Won't Kill Windows

During a post-earnings announcement conference call, Microsoft executives said that tablet sales had yet to really cannibalize PC sales, other than perhaps on the low end. "What we've seen is, over the course of this year in the consumer space, some of that volume \\[of netbook sales is\\] being replaced with newer devices, like ultra-portables and tablets," Microsoft CFO Peter Klein said. "Largely these are second devices, not primary devices." But separately, some Microsoft executives are even more aggressive. "Devices come and go," Microsoft International President Jean-Philippe Courtois said this week. Concern over iPads and other tablets, he said, was "overdone." Perhaps. But I don't think so. With consumers in particular, simpler devices that do what they want are preferable to complicated devices that need constant maintenance and oversight. This should be accepted as common sense by this point.

Microsoft Wants 16-Core Atom CPU for Servers

And you know, that's just crazy enough to make sense. Microsoft has apparently asked Intel to develop a 16-core version of its low-end Atom CPU—currently used in underpowered netbooks everywhere—for the server market. The idea is simple: The Atom is energy-efficient and could reduce power consumption dramatically in data centers. And since most servers in these data centers are under-utilized anyway, this change could reap enormous rewards. Looking a bit further down the road, of course, a system-on-a-chip (SOC) system would be even better. And you know they're heading in that direction. Soon, those refrigerator-sized rack systems that dominate data centers could be replaced by cute little toaster-sized appliances with solid state storage. Plus, they'd be quieter too.

After 21 Years, Dave Thompson Is Retiring from Microsoft

Years ago, I was given the opportunity to meet and interview key members of the original NT team at Microsoft. Among them was Dave Thompson, a man who impressed me far more than the more famous faces at the software giant, such as Bill Gates or Steve Ballmer. In fact, if pressed to cite the single meeting I've had with Microsoft that was the most impressive and awe-inducing, it would be a hard-to-decide tie between the one with Thompson and friends and my "war room" experience with Todd Wanke during the Windows XP SP2 crisis days. So, it's with a sense of wistfulness that I can now report that Mr. Thompson is leaving Microsoft after 21 years of service. His experience at the company ran from NT and Windows Server to Exchange (during which time I infamously missed a different meeting because my VW broke down en route) to Windows Azure to Business Productivity Online Services and then Office 365. Thompson isn't leaving right away, but will instead see Office 365 through to launch. My advice to the folks on the Office 365 team is simple: Enjoy this time. And learn from the master. Dave, if you're reading: You're a big deal. I'll miss you.

This Week, on the Windows Weekly Podcast

Leo and I recorded the latest episode of the Windows Weekly on Thursday as usual this week, so it should become available by the weekend on the Zune Marketplace, in iTunes, and wherever else quality podcasts are found, in both audio and video formats.

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