Microsoft at End of Year: Portents of Strong 2010?

Michael Hickins and I were talking about Microsoft earlier today and the easily confusing question of whether free online Office at this point would be stupid or brilliant. My take is that it's probably the result of some clever strategy; I won't speak for Michael on this (as if I'd need to). However, that also got us discussing how various divisions of the company were doing, so I thought I'd do a quick summary, based on publicly-available numbers, with some analysis to boot. Let's focus on the nine-month results to get as broad a view of what the company is doing as possible.

As many have noted, the first thing that jumps out is the dip in client revenue. Between the economy and the disaster that has been Vista, that is easily understood. Even so, overall revenue was up by 1.7 percent in what has been a terrible economy. But look at the overall pattern:

Given what Microsoft was battling -- economy and its own Vista problems -- the performance is pretty impressive. Servers and tools were up, online services off a fraction (and that was before Bing -- more on that tomorrow), the business apps up, and even entertainment was only down a fraction. Profit was down a bit, but all in all, the company seems in strong shape. Now consider that whether you take the half empty or half full view, chances are that Windows 7 will see a significant adoption level over the next 15 months or so, which will strengthen the most serious weakness that the company had this year. In fact, if that uptick could simply close the gap between the 2008 and 2009 revenues for client products over the first nine month period, that alone would increase the period revenue by 2.3 percent. And that's not counting improved revenue from the new version of Office 2010.