Microsoft Sees Revenue Declines But Gears Up for Windows 8

According to research by IHS, PC sales will fall 1.2% to 348.7 million units this year. This is first time since 2001 that PC sales are projected to decline over the year. This decline attributed to poor economic conditions and the increased adoption of mobile devices like the iPad.

Microsoft’s Financials
Microsoft’s (NASDAQ:MSFT) quarterly revenues fell 8% over the year to $16.01 billion, missing the Street’s target of $16.42 billion. EPS of $0.53 reported a 22% decline over the year and missed the Street’s projections of $0.56. The disappointing performance was driven by economic conditions, especially in Europe, challenges in the PC market, and the slowdown of purchases by consumers in anticipation of new product launches.

By segment, the server and tools division’s revenues grew 8% to $4.55 billion. The business division, which includes Office, saw revenues fall 2% to $5.5 billion owing to declining PC sales. Revenues from the entertainment and devices division fell 1% to $1.95 billion and the online services unit saw revenues grow 9% to $697 million.

Microsoft Gears Up for Product Launches
The next few months are crucial for Microsoft as it prepares to launch some of its most awaited products. The company has already begun taking pre-orders for its home-grown tablet, Surface. For now, Surface is being sold exclusively through Microsoft’s Web site and retail stores. The tablet will be available across all stores starting later this week.

Microsoft believes that Surface will give the iPad a run for its money. Surface is priced at $499 for a 32 GB model, compared with the 16GB iPad that sells at the same price. It operates on the Windows RT operating software and comes with a 10.6-inch touchscreen. Developers who have worked on the Surface claim that Surface has a better display capability than the new iPad despite its lower screen resolution.

Equally important, the much anticipated Windows 8 will also be available later this week. The touch-screen based OS has received mixed reviews. Windows 8 is expected to be the most significant revamp since Windows 95. It comes with a new look that is consistent across multiple devices, including PCs, laptops, tablets and smartphones, does away with the Start button and uses a Start page that displays the apps and programs as touch screen icons. Microsoft is spending heavily on marketing for Windows 8 as it believes that the OS “blurs the line between devices and PCs: Ultrabooks.”

Microsoft Not Losing focus on Azure
Microsoft isn’t losing sight of other products as it gears towards Windows 8. It recently announced the acquisition of StorSimple, a developer of storage appliances and related software. StorSimple’s products offer a cloud solution that integrates the cloud with data management functions of primary storage, backup, archive and disaster recovery. Its solutions help organizations optimize storage costs, protect data, and remain agile with their cloud needs. The acquisition is expected to complement Microsoft’s cloud offering of the Azure platform especially since most of StorSimple’s customers already use Windows Azure as their primary cloud.

Microsoft also released a preview version of Windows Azure Mobile Services where Windows Azure will be the back-end host to connect Windows 8 apps to the cloud. Microsoft also recently released Windows Azure’s Media Services offering, which is a cloud-based PaaS solution that enables users to build and deliver media solutions to customers. Consumers can use Windows Azure Media Services to deliver solutions to any device including HTML5, Silverlight, Flash, Windows. They recently also won a big deal for the service when China’s leading Internet TV service provider, PPTV Asia TV Networks (ATN), signed on to use these cloud based services.

Meanwhile, the stock is trading at $28 with a market capitalization of $235.66 billion. It touched a 52-week high of $32.95 in March 2012.