It could be hard to find any good news in Microsoft’s latest quarterly earnings, with Windows sales plummeting around 13%. However the shrinking Windows sales could be the best thing that has happened to Microsoft in a while.
Microsoft reported its earnings a while ago and they weren’t that great. Reports are in that sales for the Windows (and Windows Live) group plummeted 12.5% compared to a year previous. That number also takes into account a $540 million reduction in revenue because of an upgrade deal that gives those who buy new Windows 7 PCs a $14.99 price to buy Windows 8 when it comes out. If you exclude that number, the revenue would have only declined a mere 1.2%.
Still, a decline is still a decline, and the Windows division once again was only the third biggest revenue generator, with $4.1 billion in revenue. It trailed Business group (which is the group that makes Microsoft Office), with $6.3 billion in revenue, and the Server and Tools group, with $5.1 billion (their servers and SkyDrive)
A year ago, the Windows group accounted for 27% of all Microsoft revenue. This quarter, it accounted for 23%. And that could be a good thing, if and only if it makes Microsoft recognize that Windows isn’t its future.
Windows will continue to reap big rewards for Microsoft well into the future. But that’s not where the big money is, or where the growth is. Relying primarily on Windows would ensure that Microsoft would stagnate, and become more like a utility company than a tech company, providing something that most people need in a steady, reliable way.
The company’s Office and server and tools products are doing extremely well, and there will likely be plenty of growth there. Previous versions of Office mainly 2007 and 2010 have been amazing and have stood up for the customers’ needs. However, if Microsoft recognizes that its future isn’t Windows, it can capitalize on that, by making it available for iOS and Android. Microsoft’s mantra one day was “Windows everywhere.” Today it should be “Office everywhere.”
While the last two revisions of Office have been good, Office 2013 has its issues. It does not have not all of the features that I thought that it should have, but if you want more of my thoughts on Office 2013, check it out here
Of course, it’s only a good thing if Microsoft CEO Steve Ballmer recognizes it as an opportunity, and it’s not clear that he will. A recent Vanity Fair article said that the problems of Microsoft’s last ten years — what the article called a “lost decade” — was due in part to an over-reliance on Windows.
A year ago, at the 2011 Microsoft Worldwide Partner Conference (WPC 2011) Ballmer gave one of his hyperbolic speeches about the importance of Windows, ending with this:
“Windows is the backbone product of Microsoft. Windows PCs, Windows Phones, Windows slates. Windows Windows Windows Windows Windows.”
A year is a long time in the tech world, though. If the continuing decline of Windows sales convinces Ballmer that Windows is not the “backbone product of Microsoft,” then the company could have a high-growth future. But if he still believes it’s the backbone, Microsoft could be in for another lost decade and possibly extinction.
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