Just like people didn't buy iPhones before the latest generation came out, people held off on Microsoft products in light of the upcoming Windows 8 debutante ball. That translated to a disappointing quarter for Redmond, and underscored just how much the company has riding on its massive desktop transformation.
The computing gigantor tallied up $16 billion in revenue (down 8 percent from last year) on its way to $5.3 billion in operating income (down a whopping 26%). The company felt the crunch most in the Windows division, where sales dove 33% year over year. Surprisingly, one of the few bright spots for Microsoft was its Online Services division, which posted a 9 percent gain in overall revenue and a 15% increase in search advertising intake.
That the last three months have been a bizarro earnings period for Microsoft should come as no surprise; Windows 7 is at the end of its lifespan, which means few to none of the company's corporate clients are making big investments in the platform. The true test of Ballmer's Empire will be the next earnings report, when we'll get a sense of how well Windows 8 is selling. It's a bold departure from the desktop paradigm Microsoft has built up over the last two decades. Whether that helps stave off the competition from Apple or send users running into its arms remains to be seen.
Microsoft will be holding a call at 5:30 EDT to talk about what went wrong and right; we'll be listening in for any nuggets of joy beyond the expected Windows 8 cheerleading. [Microsoft]