Today Microsoft’s fiscal second quarter 2012 earnings results answered the question of just how weak PC demand was.
For Q2, ended December 31, Microsoft revenue was $20.89 billion, up 5 percent year over year. Operating income: $7.99 billion, a 2 percent decrease. Net income was $6.62 billion, or 78 cents a share. Both were flat year over year.
Average analyst consensus was $20.93 billion revenue and 76 cents earnings per share, for the quarter. Revenue estimates ranged from $20.20 billion to $21.35 billion, with estimated year-over-year growth of 4.9 percent — modest for a holiday quarter.
The problem lies in the Windows & Windows Live division, which dragged down Microsoft operating and net profits.
The division’s revenue fell 6 percent year over year. Worse: Operating income declined by 11 percent.
Microsoft estimates that global PC sales fell between 2 percent and 4 percent, greatly contributing to Windows revenue decline. Consumer PC sales fell by 6 percent, while those to businesses actually rose — by 2 percent. Netbooks fell 2 percent.
OEM revenue fell by 7 percent, which reflects weakness in PC shipments identified by Gartner and IDC. Three-quarters of Windows divisional revenues comes from OEM sales.
Consumers aren’t buying Windows PCs like they used to and they are buying more tablets – read Ipad.
In addition, according to an IDG Connect study released this week, IT and business professionals are rapidly adopting iPads as partial or complement laptop replacements; remember these people make technology purchase decisions for entire corporations — Microsoft’s core market.
Sixteen percent have replaced their laptop with an iPad and 54 percent supplement it. The data suggests that iPads are significantly starting to cannibalize PC sales — and not just among consumers — and it’s consistent with recent global PC buying trends.