zune

• Microsoft Corp is expected to miss internal revenue projections when their earnings come out tomorrow. Wall Street is looking for quarterly revenue of $17.1 billion, according to Reuters Estimates, short of Microsoft’s own target of $17.3 billion to $17.8 billion.With that, there is further confirmation that the rumors of Microsoft announcing job cuts tomorrow are true. 6,000 to 8,000 employees or 6 percent to 8 percent of its 95,000 are expected to be getting cut.
• Although Microsoft could hardly help this past year’s economic outcome seeing as global sales of software and video games have slumped, investors will be pressing Microsoft for what is to come of the still reigning software giant. In the last 5 years, the company has taken a few significant blows that put a grim outlook on the company over the next decade.

1. Zune. Microsoft missed an opportunity to be the top music player and application provider, having to settle for the mediocrity of the Zune player.Expect layoffs in this department, the game is over. Update: “Zune platform revenue decreased $100 million or 54% reflecting a decrease in device sales.”

2. Windows Mobile. Used to be ahead of the game, just not ahead of the times. Microsoft really missed the boat to be the first player in a standardized mobile platform for WinMo phones without a locked deck. Apple stormed onto the scene with a phone for consumers, combining the ease of the iPod with the user experience of a real internet browser. A year later the phone opened to third party developers to sell applications creating yet another billion dollar marketplace for Apple, The App Store. This could and should have been Microsoft. by the time the App Store came out, over 18,000 mobile applications for Windows Mobile existed around the web from third party developers that never had a home on deck where their creations were aggregated, promoted and sold. Investors will be hounding Microsoft about the upcoming release of Windows Mobile in Barcelona, which finally will feature an applications marketplace (Screenshots here).The iPhone has passed WinMo is market share, and faces increasingly stiff competition from new comer Google Android, Palm’s Pre and of course Blackberry. The question is, can they jump back into the game or is it too late?

3. Search. 2008 could have been the beginning of a prosperous new search brand combining Microsoft and Yahoo. Microsoft Live is down to a measly 5.56% market share against Google’s 72%. This is yet another market Microsoft was too late to get into and the future doesn’t look bright. The only real hope is to buy Yahoo, which will most likely happen in 2009, although even Yahoo’s market share is declining and may be on the fritz for good. Yahoo market share is down to 17% from 21% last year. Investors will be asking some serious questions tomorrow regarding the future of this deal and if it’s likely to happen. I hate to say the search game has been won, but has it?

4. Software. Sales of Windows software for PCs and laptops are expected to drop 3 percent from a year earlier, making it the toughest quarter in eight years. The popularity of netbooks using Linux based software in 2008 and increasing market share from Apple Laptops is seeing Windows left in the dark. It’s tough to bet long term on Microsoft Software as you can see where young computer users are adopting Apple products. Let’s not forget the conversation about the shift of software into the cloud, making desktop applications extinct for 90% of us that don’t need encrypted enterprise desktop apps. Windows 7, which just released in Beta will be a big topic tomorrow, as Vista contained many bugs and dissatisfied many loyal users. Needless to say, I am down all the way on Microsoft.

Update. Microsoft outed their earnings. Here is what happened. You guessed it, TinyComb was right on again. Microsoft Corp. today announced revenue of $16.63 billion for the second quarter ended Dec. 31, 2008, a 2% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8%, 11% and 6%, respectively, compared with the prior year. Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks. However, strong annuity licensing drove Server & Tools revenue growth of 15%. Entertainment and Devices revenue grew 3% driven by strong holiday demand for Xbox 360 consoles with a record 6 million units sold in the quarter. As part of this plan, Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.

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