Microsoft (MSFT): Really Awful

Microsoft did not do as well as Wall St. had hoped. The company posted revenue of $13.1 billion and EPS of $.34 . Analysts were looking for $.36 on $14.38 billion in revenue,  A year ago, the world’s largest software company earned $.46 on nearly $15.84 billion in sales, which means that revenue dropped 17%.

Shares fell 8% on the news.

Numbers from most of the divisions were week. Client revenue dropped to $3.1 billion from $4.4 billion. Sever and tools revenue was down less sharply from $3.7 billion to $3.5 billion. Online revenue dropped to $837 million from $831 million. Business division revenue dropped sharply from $5.3 billion to $4.6 billion and Entertainment and Devices revenue from $1.6 billion to $1.2 billion.

Segment operating income also worsened in each business unit:

Operating Income (Loss)                Q609/    Q609                Year 09    Year 08
———————–
Client                                                    $2,167   $3,250          $10,856  $13,105
Server and Tools                                 1,349     1,369                5,327      4,539
Online Services Business                  (732)     (485)              (2,253)    (1,222)
Microsoft Business Division              2,816    3,359            12,141   12,369
Entertainment & Devices                    (130)    (171)                   169      497
Corporate-level activity                   (1,483)  (1,643)          (5,877)  (7,017)
——   ——   ——   ——
Consolidated                                          $3,987   $5,679       $20,363  $22,271
======   ======  =======  =======

Microsoft is providing operating expense guidance of $26.6 billion to $26.9 billion for the full year ending June 30, 2010.

Things are getting bad in Redmond. Windows 7 will have to be a hit, or it will be a long decade.

Douglas A. McIntyre