I'm taking a few days off so I didn't listen to the Microsoft (MSFT) conference call. But I can't help watching enterprise-software press reports go by. So what's up with the contrast between these two opening sentences:
- ZDnet says "Fueled by Windows 7 and a strong PC upgrade cycle, Microsoft topped estimates for its March quarter."
- Bloomberg says "Microsoft Corp. (and Amazon.com Inc.) fell after releasing earnings reports that showed a rebound in technology spending by companies and online buying by consumers is less robust than analysts had predicted."
Dessert topping or floor wax? Wait, it turns out they're both right. It's just that Bloomberg held Microsoft to a higher standard. It didn't meet the higher end of analyst expectations.
Bloomberg found analysts that were looking under the covers to compare consumer vs. enterprise software spending. The former wasn't as strong as hoped they said and the the latter is still weak. I agree in general--remember I did not listen to the specific conference call or read the transcript--and a Microsoft PPT reprinted in ZDnet shows that its outlook is tied to overall server system results, which it won't predict. On the other hand, I think Microsoft has a history of setting expectations low in its third quarter, the period just ended, and then closing its fiscal year ending in June strongly.
And don't compare Amazon (AMAZ) with Microsoft, at least not before 2015 or so. Microsoft is well positoned to take advantage of the conflation of consumer and enterprise computing. And it's saying all the right things about making a transition to developing and marketing the technology-enabled business and consumer services it would take to make such a transition successful. But the execution so far has been abysmal and the competition will not be stodgy "old" information technology companies but real marketeers.
(As an aside, for a Cape Codder, the southern end of the Outer Banks of NC is the Cape Cod Seashore Park on steroids and well worth the drive. Point Reyes CA still wins the battle of national seashores but that's an upcoming post on my travel blog.)
-- Dennis Byron
(No financial interest in any company mentioned except for the $12 a year I pay Microsoft for Office.)