Prior to the release of Windows 8, Microsoft reported a 22% fall in quarterly profits. Total revenue fell 8% to 16 billion. What are the reasons for this?
One of them may be the recent shift in trends, from laptops to the increasingly popular tablets. This includes rival company Apple’s iPad, and with the release of the new iPad 4 on November 2nd, things may get even worse for Microsoft.
Another major reason is the fact that Microsoft deferred $1.36 billion of revenue. Over 50% of this deferred revenue ($783 million) came from the licensing fees for PCs pre-loaded with Windows 8, which could not be recognized until the new operating system came out later on October 28.
Microsoft also deferred $384 million for Windows 7 PCs that were eligible for a $15 upgrade to Windows 8, as well as $189 for PCs shipped with Microsoft Office 2013 (or are eligible for an upgrade to it).
The fact that Microsoft had such a sharp fall in profit and failed to meet analyst expectations caused shares to fall 3% in extended trading.
Microsoft expects to make a huge comeback with the release of Windows 8 and the new Microsoft Surface tablet. With these two products receiving generally mixed reviews, though, can Microsoft pull it off?
References:
http://www.bbc.co.uk/news/business-19999901
http://www.itproportal.com/2012/10/19/microsoft-quarterly-profit-tumbles-22-due-to-weak-pc-sales/
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