Microsoft earnings fall well short as Surface flops
(MoneyWatch) Microsoft (MSFT) badly missed analyst expectations in its results for its fourth quarter ending June 30 and for the entire fiscal year 2013. Quarterly revenue of $19.9 billion fell below consensus $20.7 billion with a $900 million charge to "related to Surface RT adjustments," which means that a device intended to save the corporate ship instead punctured the hull. Similarly, earnings per share of 59 cents would have badly missed the estimate of 75 cents even without the inventory charge that cost 7 cents per share.
Annual results were also a wide miss. Revenue was $73.7 billion rather than $78.7 billion, and earnings were $2.62 per share instead of $2.75. Microsoft stock tumbled more than 5 percent immediately in after-hours trading.
Microsoft rarely misses analyst expectations, and the gap was shockingly large. The results help explain the major reorganization that CEO Steve Ballmer undertook. However, it remains unclear whether the realignments he sought will have a positive impact on the company or are just Windows dressing.
- Microsoft pulls a U-turn, this time with Xbox One
- Microsoft slashes Surface prices to lure buyers
- PS4 vs Xbox One: Microsoft hands Sony a big win
- Microsoft desperately seeks a fix
Microsoft's problem has been years in the marking. It was initially late for the Internet wave, although that recovery took place when Bill Gates was still chief executive. The bigger problem for the company has been its unending reliance on the twin profit generators of PC operating systems (Windows) and office productivity software (Office).
Unfortunately for the company, the world has moved away from the PC-centric version of computing. Even as former insiders pointed out that the company was hobbling new product areas to protect the importance of its standard-bearers, management paid no heed.
Eventually the situation became so dire, as Apple (AAPL) and Google (GOOG) split the mobile platform market between them, that Ballmer had to react. But Windows Phone has yet to take off, and as the $900 million charge shows, Microsoft's answer to the iPad is a bitter disappointment. Surface seems to have sunk below the surface of the market.
Only days ago, Microsoft announced the major reorganization that had been rumored. However, it isn't clear that the results will actually change how the company does business because, to move forward, it must still loosen its fascination with the products that initially brought its financial strength.