back to article Stalled cloud growth, software flatlining, hated Lumias unsold... It's all fine, says Microsoft CEO

Microsoft is putting a brave face on disappointing third-quarter earnings that saw profits fall 25 per cent year-on-year and cloud revenues failing to rise fast enough to offset losses in other areas. Earnings per share were $0.62 non-GAAP, down 23 per cent from 2015, compared to analysts' estimates of $0.64. "We had a solid …

  1. a_yank_lurker

    PHB speak or Orwell

    Declining net is not a good sign for any company. The PHB speak is trying to say we haven't clue but will not admit it.

    1. Bob Vistakin
      Pint

      Re: PHB speak or Orwell

      There's as much chance of microsoft going bankrupt as there is of David Cameron asking Jimmy Carr if he fancies a quick one down the Pigs Head.

      Unfortunately, the industry will be paying for the decades of brainwashing its customers suffered for some time yet. They are waking up, and know now there are better alternatives, but inertia is one hell of a powerful force.

  2. Trevor_Pott Gold badge

    I wonder what will come first: bankruptcy or a realization that obtaining and retaining the trust of your customers, partners, developers and staff is vital to the long term functioning of a business?

    Oh, I forgot, they're Microsoft. They don't need trust. They abuse dominant market positions.

    ...but for how long, I wonder?

    1. asdf

      It will be quite some time before Microsoft disappears. Can't say the same for WinPhone though. Yikes that thing is an embarassment.

      1. Trevor_Pott Gold badge

        SCO hung around for a long time too. What's your point?

        Yahoo. Sun. Novell. On and on. Netapp will take a long time to shrivel and die too, but ineptitude is caustic, contagious...and fatal.

        The two ways to kill a company are to allow your customers to walk away from you or for you to walk away from your customers. Deciding that trust is irrelevant and that you will gladly dispense with it in order to meet arbitrary and irrelevant adoption metrics absolutely is walking away from your customers. Spending billions on a market segment and remaining less than a joke is your customers walking away from you.

        Tick, tock. There's time left on that clock...

        ...but how much?

        1. Mark Honman

          IBM used to be the evil callous gorilla of the IT world; somewhere in the 1990s they realised their stranglehold was lost and the only way to stay in business was to build positive (as opposed to extortionate) relationships with their customers.

          I hope & expect that Microsoft will do the same, probably retreating to being the world's leading provider of enterprise client computing software (yes, with the cloudy bits).

          There are bits of the company that are showing signs of the new "give the customer what they want" behaviour, and I look forward to the "RS6000 moment" when Microsoft products can be recommended on their merits and without fear of lock-in.

          1. Dan 55 Silver badge

            Well they did have a chance to do that and it looked like they were doing it, but SadNav turned that around. On privacy, on herding people into the cloud by raising prices on software bundles and licensing, and finally on raising cloud pricing.

            And as for mobile, it's just one burning platform after another (6.5, 7, 8, 10...).

            I think bankruptcy is still a long way off though.

          2. BitDr
            Pint

            An upvote for you mate!

            I loath Microsoft, but it was not always the case. They are a company I would really like to be able to stand behind; but I can't. Their lock-in mentality was the start of it, the malware mimicking tactics of their marketing department and Win 10 are just the cherries on top. Bits of the company are changing, but they will be unable to become a completely different animal. I don't think so... if they do begin to have success they could, like an addict, slip back into their old mindset, and I think that is exactly what would happen. They, as IBM has, have to practically fade into the background while remaining a useful contributor. They need to remain a meaningful part of the IT eco-system while not trying to lead the parade; they need to be humble. It will take a brave person at the helm to admit they have screwed up so badly; and I don't think they yet have it in them to do it.

      2. This post has been deleted by its author

    2. Anonymous Coward
      Anonymous Coward

      Bankruptcy?

      Are you serious? You might want to look at their balance sheet. It doesn't matter how many stupid things they do, Windows & Office are easily offsetting those and they're still profitable. Even if those eventually fade they have tens of billions in cash they'd have to burn through. They can't go bankrupt in our lifetimes.

      1. Anonymous Coward
        Anonymous Coward

        Re: Bankruptcy?

        " Even if those eventually fade they have tens of billions (of shareholders money) in cash they'd have to burn through."

        Most shareholders would not allow a company without any good strategy to burn the cash assets

      2. Trevor_Pott Gold badge

        Re: Bankruptcy?

        Yes. Bankruptcy. For an entity Microsoft's size that would probably take 30-40 years to play out. But to presume that is simply can't is the province of faith and a determination not to learn from history.

        Microsoft isn't going under tomorrow, but I said nothing of immediacy in any of my posts here.

      3. Charlie Clark Silver badge

        Re: Bankruptcy?

        Windows & Office are easily offsetting those and they're still profitable.

        Not really, especially Office sales Y-o-Y are disappointing considering a major new release last year. Only time will tell if the shift to Subscription Office will work as well.

        And, for all the noise about Windows 10, it should also have driven sales of some new gear: I suspect numbers for both MS and PC makes would have been even worse without it.

        Microsoft still has enough cash to cease trading and continue as Sonomish Hathaway. I suppose we can expect to see the phone division wound up or sold for a dollar to Foxconn. But where is the new growth coming from? Azure's headline numbers are impressive but starting from a very low base.

    3. BitDr

      They are behaving...

      They are behaving in exactly the same manner as the big tech-giants of old. Businesses fail when they become so successful that they think they are incapable of failure, that they can make and do anything with only fanfares and financial gain as the result. Like the companies that came before them, their arrogance will hurt them. IBM still exists, but it is a much leaner company today when compared to its former self, and much less egotistical in its public behaviour. Microsoft may have an ocean of money, but even an ocean will diminish in size when evaporation exceeds rainfall and they will have to dance very long and hard to bring on even small rainstorms. I think Microsoft is very-near the point of no-return when it comes to public-trust, and trust is very difficult if not impossible to regain.

  3. Anonymous Coward
    Anonymous Coward

    And in other news

    MS Stock fell in after hours trading

    http://www.nasdaq.com/symbol/msft/after-hours

    Down 5.2%

    MS has really lost it in the mobile space. You can't keep on losing customers at that rate and stay competitive. IMO, we really need three platforms to keep the others happy.

    Question: If MS Pulls the plug on WinPhone (or whatever it is called today) will we get the W7 type non touch desktop back? Given the really heavy advertising of Surface that MS are currently doing I think not. Sad. so sad.

    Alphabet(nee Google) was also down 6.1%

    http://www.nasdaq.com/symbol/goog/after-hours

    after missing the earnings targets

    The big one Apple is next week. Down 10% even if they hit their targets?

    Wall St really hates Apple (IMHO).

    1. largefile

      Re: And in other news

      You already got back your W7 type desktop in Windows 10 with a better OS as well. You can set up a Surface with just a touch GUI that's great for consumption, kids, elderly etc or you can have it boot to the 7 type of desktop you are used to....and have it stay there.

      Buy low, sell high. Pick up a few shares of Microsoft when the market opens and reap your rewards. Been making me good coin for the last few years. You folks should study investing rather than sit around hating Microsoft which is so often the case in these threads.

      1. Anonymous Coward
        Anonymous Coward

        Re: And in other news

        Windows 10 does not have a windows 7 desktop. Windows 10 is basically windows 8.2, all the failings of windows 8 still in there. I removed the free windows 10, it's too unreliable, too unintuitive, too invasive. Gone back to win7 and its all good again, and just as fast.

        Windows phone is still failing, as is surface, as is Xbox one (notable by its absence, replaced with Bullshit Xbox live numbers).

        What does Microsoft have thats not on fire bor already burnt????? Not a lot...

        1. Sandtitz Silver badge
          FAIL

          Re: And in other news @Cowardly Troll

          "Windows phone is still failing, as is surface, as is Xbox one (notable by its absence, replaced with Bullshit Xbox live numbers)."

          Did you even read the article before posting?

          "Surface revenue increased 61 per cent in constant currency to $1.1bn, thanks to the Surface Pro 4 and Surface Book."

          and

          "Xbox Live users rose 26 per cent year on the year, bringing more gamers into the fold"

          By all accounts the Surface is generally seen as success for Microsoft. The first iterations were not, especially the ARM version. Please explain how you see Surface as failing.

          The 26% rise on Xbox users probably stems from sold Xbox devices, or do people just suddenly start using them? Again, PS4 reportedly trounces the Xbox in sales and profits, but the Xbox is still profitable, and AFAIK the devices are rather close specifications-wise. (I don't play nor own either)

          We all agree on failing Windows Phone sales but 1 out of 3 correct answers? Tsk, tsk. No upvotes from me.

          1. nkuk

            Re: And in other news @Cowardly Troll

            "xbox live users" is a meaningless measurement in financial terms. Its not a measure of an increase in xbox one users or consoles sold, its a rise in subscriptions. It covers both old and new consoles, the figure includes both and there have been big price drops in the cost of a subscription, so its not surprising more people bought one. Its perfectly feasible that the number of consoles is the same as last year overall (I'm sure that's not the case) but the number of subscriptions has increased 26% due to lower price.

            It says nothing about the figures people are actually interested in, its a diversion using a positive number to distract from what they're not reporting.

          2. Anonymous Coward
            Anonymous Coward

            Re: And in other news @Cowardly Troll

            "The 26% rise on Xbox users probably stems from sold Xbox devices,"

            Nope, it's from W10 free Xbox Live signups... Nothing to do with hardware sales. Sorry to disappoint you. Microsoft are being deliberately vague, which almost certainly means it's not met the market's already massively scaled back devices division sales forecasts.

            I can see them dumping Xbox business very soon.

      2. hplasm
        Gimp

        Re: And in other news

        "...You folks should study investing rather than sit around hating Microsoft..."

        How much for your Grandmother?

      3. Anonymous Coward
        Anonymous Coward

        Re: And in other news

        Study Investing?

        Yeah, been there, done that. Made a good pile of $$$ and ££££ over the years. Lost a bit as well.

        Win some, lose some. Cashed out my Apple stock (held since 1996) at $125/share last year. Retirement funded and Mrs AC has a new car already.

        As for MS, if they continue to miss earnings then their price will keep dropping and wil not recover.

        Wall St seems to only look at the earnings these days.

      4. Anonymous Coward
        Anonymous Coward

        Re: And in other news

        "You folks should study investing"

        LOL, Look at the tech, it's clear Microsoft are failing, and failing massively, it's just the market hasn't realized yet. There is a huge crash coming for Microsoft's stock. it can't continue to rise when everything it owns is failing so badly. it's simply not possible.

    2. Anonymous Coward
      Anonymous Coward

      Re: And in other news

      The big one Apple is next week. Down 10% even if they hit their targets?

      Wall St really hates Apple (IMHO).

      Probably because they don't need to "sponsor" all the traditional parties to talk them up. What would be really funny is if they were up, because I can see that piss off Google and Microsoft no end :)

      1. Anonymous Coward
        Anonymous Coward

        @AC - "Wall Street hates Apple"

        Not really, they are just suspicious of them because they have been wrong about their future prospects for so long. Apple has had a below market P/E since the 2008 crash, yet they've seen growth that would have justified a huge P/E. Every quarter Wall Street would expect fantastic growth from Apple (much better than their guidance) but the P/E stayed low, showing Wall Street thought Apple's growth prospects beyond the next year were minimal. They were wrong about that for years, always wanting to Apple to tip its hand about what it will do after the iPhone for more growth. Wall Street hates not knowing what the future holds for a company, because it shows they don't understand them. They tend to undervalue such companies relate to similar companies that more closely follow their projections.

        Another problem they have with Apple is the iPhone business alone is larger than any other US company, so a new product that would be seen as terrific for any other company and cause their stock price to shoot through the roof will barely affect Apple because it is starting from such a high bar. The dependence on iPhone sales makes Wall Street nervous, they want something new. Problem is, Apple doesn't tell them anything. Google restructured their whole company in a more Wall Street friendly manner, and is open about all their "big bets". Even though they lose money on all those bets Wall Street still assumes a lot of future growth from them, because they figure at least they are trying and will eventually have a hit. Apple is a black box, and refuses to play the Wall Street game by telling them what it is they are spending all those billions in R&D on. Secrecy doesn't play well with Wall Street, they like to be "in the know" so they can make money off the muppets (i.e. you and me) they don't like being the muppets themselves.

  4. Anonymous Coward
    Anonymous Coward

    After Microsoft

    Nadella could be the next Director of the FBI.

  5. NJobs

    Financial stats dampen the 'Cloud Hype'...again

    MS continues with its false Cloud marketing campaign. Back in 2014, it was reported that MS's Commercial Cloud business accounted for only 5.6% of its total Commercial (perpetual software licensing accounted for the majority of the remaining $45bn spend (see report below). Nothing has changed apart from the way it accounts for things.

    http://www.discount-licensing.com/files/Commercial%20Cloud%20Dwarfed%20by%20Perpetual%20Software%20Licence%20Spend%20(Jan%2015).pdf

  6. Anonymous Coward
    Anonymous Coward

    So can MS finally admit...

    ---------------

    Windows Phone is Dead, OK mothballed, if MS won't admit dead. (it's dead though)

    Joe B is not on a Sabbatical.

    (If he ever was, he chose the worst time for leave of absence)

    The App Store needs some love.

    ---------------

    Microsoft need to use Topcashback / Quidco in the UK, to promote Windows 10, giving cashback in the form of App credit, with every install of Windows 10. Create a slush fund for developers to go after.

    Have a totaliser (Blue Peter style) to show how much free credit has been given away for Developers to see.

    (Hence my reasoning why Windows 10 shouldn't be free after July).

    Charge, give free App Credit back, it makes sense to build an MS Universal App Ecosystem.

    1. Anonymous Coward
      Anonymous Coward

      @Adam Jarvis

      It's not dead, its pining for the fjords.

      (Slightly inaccurate, as Norway is the one with fjords, not Finland)

  7. Anonymous Coward
    Anonymous Coward

    OUCH

    The trouble is that people now have a choice in many cases not to use Micros~, which they didn't before, and quite often their software just isn't as good as the competition. They also have the looming problem that all cutting edge internet technology runs on competing technology stacks. If their Office cash-cow started to shrink (and surely it must at some point) then they are left with a tonne of also-ran products: Xbox, Azure , Windows Phone, none of which are anywhere near being market leaders and are of dubious profitability.

  8. Porco Rosso

    Cloud

    I don't know but for me there is something wrong with the business model of the cloud

    the tech is super,

    they are all growing at 2digits in the cloud, the Oracle, SAP, Saleforce, Amazone, IBM, Netflix, Microsoft etc etc

    but if you look at the NET profit of the cloud part without the gimmicks .. there losing money ...

    even company's who are +10 years in the cloud-business-service and are the leader in there service have a NET-Profit which is negative.

    Is this a sustainable business model ?

    Don't you need to make a real profit and not a cash injection from the stocks on wall street .. ?

    May be I'm too stupid or so to understand the dynamic, but for me a business who is 10years old and still is losing net money then there is something wrong with it.

    At which point are they big enough to make real money ...

    Big as a monopoly like Alphabet search service ?

  9. 0laf
    Facepalm

    MS slowly works its way to a Swiss clinic

    I really like my Windows 8.1 Lumia and even I wouldn't buy a new one now.

    Why would I buy a new Microsoft phone when it's just as expensive as a half decent 'droid yet MS supports Android better than their own mobile OS.

    When I plug in my Windows Phone into my W10 PC it proudly tells me I can get MS Office apps on my Android phone.

    MS you are feckin useless.

  10. YARR

    Phone branding

    Re. "Phone revenue plummeted 46 per cent in constant currency: Microsoft only sold 2.3 million Lumia devices in the quarter, down 73 per cent year on year."

    They're not Lumia devices - they're Microsoft devices. The one thing of any value that remains from the Nokia acquisition - the Lumia brand name - they bizarrely decide not to use. Who wants a phone or a games console with "Microsoft" prominently emblazoned over it?

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