Microsoft gets Knuckles Rapped
Ruler
Microsoft’s second-quarter results Thursday, in which net profit fell 11 percent, show that the company is still largely dependent on its Windows client business for its financial health. That business in turn is dependent on the market for PC sales, which is currently flat and shows no signs of improving over the short term.
Microsoft has been trying to diversify its revenue for some time and has made incremental progress. But until other parts of the business begin to pull in more revenue, the company should examine ways to keep its Windows client business from damaging its overall financial health if the current economic condition worsens, analysts said.
Microsoft put considerable investment and time into developing Vista, expecting the OS to be more successful than it has been. In the middle of Vista’s development cycle, the company also had to put out a major update to Windows XP in the form of a service pack that it did not charge for, also interrupting the normal revenue flow of its client business.
At the time it was developing Vista, Microsoft thought it could “change the PC market with a new OS,” Directions on Microsoft’s Rosoff said.
However, consumers as a whole did not rush out to purchase new machines just because they had Vista on them, and many companies opted to skip the OS altogether and continue to run XP instead.
Microsoft has now learned that Windows client is not going to be the kind of product that will “suddenly spur this huge wave” of PC market growth, Rosoff said, and it probably will approach the business with that in mind in the future.
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