Microsoft's awful Q4: will Windows 7 save the day?

Microsoft's money update came as a nasty shock last night. In IT Blogwatch, bloggers debate the outlook for the Redmond offices and beyond: will Windows 7 be full of win, or will the 'softies have to exchange bling for Bing?

By Richi Jennings: your humble blogwatcher, who selected these bloggy morsels for your enjoyment. Not to mention how the French sell lingerie...

John Timmer brings the bad news:

At the close of trading Thursday, Microsoft announced the results for its fiscal fourth quarter. Its revenue, at $13.1 billion, was a 17 percent drop-off from the same quarter last year, and all the other financial measures—operating and net income, earnings per share—dropped anywhere from 25 to 30 percent.
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At the same time, it's clear that the company has held its expenses down, as earnings rose slightly on a quarterly basis despite the continued drop in revenue. You can either interpret that as a company continuing to struggle with the downturn, or one that's clearly got its act together when it comes to riding out the economic storm.

Gavin Clarke focuses on Windows' woeful ways:

The overall revenue loss ensured Microsoft missed Wall Street's anticipated target by around a billion dollars. Investors had hoped for $14.37bn. Of Microsoft's five business units, it was the core Windows client that was the biggest drag on performance. Revenue fell 28 per cent.
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Chief financial officer Chris Liddell ... predicted Windows client revenue could outpace PC sales by the end of this year - the Microsoft's fiscal second quarter and the calendar fourth quarter that covers ... Thanksgiving and Christmas. ... Liddell bet on a perfect storm of the power of Window 7, due to ship on October 23, and an improving economy.

Harry McCracken chews the cud:

The Windows cash cow takes a beating. ... For those of us who are Microsoft customers rather than shareholders, the most striking factoid may be this: The company’s revenue from Windows took a hit of more than a billion dollars compared to what it reaped a year ago.

How come? Well, the crummy state of the worldwide economy didn’t help, but another factor was the ongoing popularity of netbooks. They typically sell for less than a $400, and ... Microsoft can’t charge as much money. ... Netbooks ... are here to stay. ... If consumers buy ‘em, ... they’ll have a profound effect on Microsoft’s fortunes.

Todd Bishop points out that it's not just Windows:

Each of Microsoft's five business divisions saw a decline in revenue.
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Even Microsoft's stalwart Server & Tools Division was affected, posting a 6 percent decline in quarterly revenue. ... The Entertainment & Devices division also struggled, with most of its businesses seeing a decline. ... The Microsoft Business Division, which makes Office and related products, also was affected. ... revenue decreased $413 million or 10%. ... The operating loss in the company's Online Services Business widened to $732 million for the quarter, as revenue fell by 13 percent.

Erick Schonfeld focuses in on Online:

Every business got hit hard, but the worst-performing business by far was the online business. It had the biggest operating loss. ... Every dollar of online revenue was wiped out by a dollar of operating loss. And those operating losses really stack up. For its fiscal year ... [it was] nearly twice as much as the year before.

Despite the much-ballyhooed launch of Bing, search revenue was flat in the quarter. ... You’ve got to wonder how much of the ballooning operating loss is going into Bing, and whether those investments will ever pan out.

John Paczkowski doesn't mince words, natch:

Gruesome. ... Microsoft Disappoints…Big Time.
... The company missed estimates by $1 billion.
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Good thing Wall Street wasn’t expecting much from Microsoft. Because it didn’t get it.

So what's your take?
Get involved: leave a comment.

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Richi Jennings is an independent analyst/consultant, specializing in blogging, email, and spam. A 24 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You can follow him as @richi on Twitter or richij on FriendFeed, pretend to be Richi's friend on Facebook, or just use good old email: itblogwatch@richij.com.