Windows losing sheen as Microsoft’s cash cow

by Sharon Lobo    Apr 19, 2013

Losing Money

Yesterday, Microsoft unveiled its third-quarter results, where the quarterly revenue stood at $20.49 billion. However, the company managed to rake this revenue from its non-Windows products, as Steve Ballmer, CEO of Microsoft affirms, “The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox LIVE, and Skype.”

On the other hand, the Windows division posted revenue of $5.70 billion, a 23% increase from the prior year period. However, adjusting for the recognition of revenue related to the Windows Upgrade Offer, the division’s non-GAAP revenue was flat.

This trend is not surprising considering the continuous slump in PC sales as users gradually move towards tablets. Also, users don’t seem to be upbeat about Windows 8, which has a market share of just 3.17%. On the contrary, Windows XP, which was launched more than a decade ago has a market share of 38.73% according to Net Applications. This is surprising considering in less than a year Microsoft would officially end support for the OS.

While there is still work to do, we are optimistic that the bets we’ve made on Windows devices position us well for the long-term.
-Steve Ballmer, CEO, Microsoft

To add to Microsoft’s woes, Windows 8 has not only failed to make a positive impact on PC sales but has in fact caused a drop in sales, as Bob O’Donnell, Program VP - Clients and Displays, IDC explains, “At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market. While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. “

Microsoft has taken positive steps towards reviving its other line of products including Windows Phone and Outlook, however moving forward it will have to make some very tough decisions as far a Windows is considered if it wants to help reinvigorate the PC market and in turn the sales of Windows.