Microsoft's worst third quarter ever

[Updated to fix broken links]

In Friday's IT Blogwatch, Richi Jennings watches Microsoft suffer its first ever drop in revenue. Not to mention fun with auto-tuning...

Kara Swisher swishes in, to report "the econalypse":

Microsoft’s earnings and revenue took a hit in its third quarter, as expected, with profits down 32 percent from a year ago on a six percent sales decline ... The company’s first-ever year-over-year quarterly sales drop.
...
The culprit for most of the bad news was the decline in consumer and business spending on computers, since half of Microsoft’s operating income comes from sales of its Windows operating system. But its online services also got hit badly, with a 14 percent decline in revenue from a year ago to $721 million. Losses doubled to $575 million. Oof!

In case you missed it, here's Anthony Ha:

Microsoft is showing its first year-over-year drop in revenue since the company went public. That’s right, this is its first drop in 23 years.
...
Net income was $2.98 billion and the company earned 33 cents per share, representing drops of 32 percent and 30 percent, respectively. Those numbers fall short of analysts’ predictions of 39 cents per share, and the news comes just a day after Apple easily beat analyst estimates and reported a healthy year-over-year increase.

Steven J. Vaughan-Nichols falls in:

I've long thought it funny when Microsoft-fans would tell me how Linux, open-source, the Mac, whatever would never be important because Microsoft products were clearly better. Now, everyone can get on the joke.
...
What's caused this? ... the economy is a mess. We all know that ... [But] it's more than that ... I blame Microsoft's management. They've been sloppy and lazy for years now ... [And] the rot starts from the top with Steve Ballmer.

But David Worthington says it's, "not necessarily a sea change":

In its filings, Microsoft noted that its earnings per share would have amounted to 39 cents if it were not for one time charges for employee severance costs and investment impairments. That figure would have met analysts’ estimates, according to reports.

By the company’s own omission, Windows client license revenues are down, but that does not mean that netbooks loaded with Linux are going to permanently displace Windows ... Despite its lowered earnings and occasional missteps, Microsoft remains in a competitive position in a number of product categories–without having ever accrued any long term debt. It is a strong company that is making operational and structural changes to adapt to the economic environment.

Alexander Sliwinski thinks it, "coulda been worse":

On a happier note -- and pretty much the only relevant part for gamers -- the Xbox 360 console sold 1.7 million units during the quarter, an impressive year-over-year increase of 30 percent. The company also claims that the current tie ratio for the console is 8.3 games per owner.

The company's chief financial officer said he was happy with the results given that this is the "most difficult economic environment" in the company's history.

Yoni Heisler offers some home truths:

The stock market is all about growth. $8 Billion in profits year in and year out won’t move your stock price. Naturally, the more money you make, the more challenging it becomes to produce significant growth year in and year out. In Microsoft’s case, it’s becoming more and more apparent that they’re falling victim to the old cliche, victimized by their own success.

When you have 90+% of the computer market, the only where you can really go is down. At best, you can maintain your position. Still, as Apple shareholders rejoice in light of Apple’s recent earnings report, Microsoft’s earnings might help remind them who the big dog on campus still is.

And finally...

• Fun with auto-tuning
  [hat tip: Hermione Way]

Previously in IT Blogwatch:

• Apple's netbook strategy: deny, deny, deny
• TWC's un-metered broadband is, err, metered
• Oracle-Sun: "Dumb... Sad... Moronic."
• ...more

Buffer overflow:

• Shark Bait: Desktops on desk tops
• Richi Jennings: Astaro drops its R&D-led roadmap
• Layer 8: Weather forecasts threatened by satellite network costs, delays
• Stacey Higginbotham: Find the Right Wireless Broadband for You
• David Pogue: Pogue's Top Ten Cocktail-Party Questions
• Brady Forrest: Windows 7 Starter Pushes the Web and IE
• Locutus: There are 10 basic types of business models.
• Stan Schroeder: Was The Pirate Bay Judge Biased?
• Michael Arrington: Hiring Of New MySpace CEO Settles Many Old Scores
• ...more

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Richi Jennings is an independent analyst/adviser/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 on Twitter, pretend to be Richi's friend on Facebook, or just use boring old email: blogwatch@richi.co.uk.