Microsoft Revenue Up 7% To $17.37B, Earnings At $0.68 Per Share
Microsoft just reported its first quarter 2012 earnings today with revenues of $17.37 billion, an 7% increase from the same period of the prior year. Microsoft's operating income was $7.20 billion, its net income was $5.74 billion …
Context & Ripple Effects
Microsoft's fiscal first quarter extends the run that began with its record third-quarter results reported in April 2011: another year-over-year gain, this time 7% to $17.37 billion, with operating income of $7.20 billion and EPS of $0.68. The number landed on forecasts — MarketBeat's same-day pickup noted the stock fell anyway — so the story is less the beat than what the quarter funds.
That context matters because the week around the print was dense with forward bets: the Skype acquisition closed days earlier, Steve Ballmer used the Web 2.0 Summit to attack Google Apps, Android and the iPhone, and Microsoft said it is working with Qualcomm and other parts makers to cut Windows Phone 7 handset production costs by more than half next year.
First-order effects
- Investors read the quarter as merely in line — the stock's decline on an on-forecast print signals the market is pricing Microsoft on its mobile and cloud trajectory, not on Windows-and-Office cash generation.
- Windows Phone hardware partners get a concrete cost path: Microsoft's confirmed work with Qualcomm and other suppliers targets production costs falling by more than half next year, directly improving the margin math for carriers and OEMs considering the platform.
Second-order effects
- Cheaper handsets force the comparison onto price against Android and iPhone — the platforms Ballmer attacked publicly at the Web 2.0 Summit two days before the print — pressuring rivals' entry-level device economics.
- With Skype now closed, Microsoft has an acquired communications asset to fold into Windows Phone and its enterprise stack, raising integration expectations for competitors like Google that sell collaboration tools against Office.
Third-order effects
- If the pattern holds, Microsoft's structure becomes a core-franchise annuity subsidizing a second act in mobile and enterprise services — the mobile BI roadmap reaching iOS and Android acknowledges the company must meet customers on rival platforms rather than wait for Windows 8 devices.
- A sustained gap between steady double-digit-margin legacy results and a flat stock reaction points toward investor pressure for segment-level disclosure and accountability, making each future quarter a referendum on the non-Windows businesses.
The trend: Legacy software franchises are being run as funding engines for costly mobile-platform land grabs, with quarterly prints judged less on headline growth than on whether the second act is gaining traction.