THE MICROSOFT INVESTOR: PC Sales Continue To Suck, What Does That Mean For Microsoft?

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PC trash

MSFT Diving With Tech
Markets are getting clobbered in today with MSFT off close to 2%. Microsoft will report earnings on Thursday, July 19. Catalysts for the stock include Windows 8, Windows Server 8, Office 15 and Windows Phone 8; expansion in the smartphone market with primary hardware partner Nokia as well as tablet market with Surface; strides in cloud computing; profitability in the online business, including integration of Skype; and continued evolution of Kinect and next generation Xbox. The stock currently trades at 7.3x Enterprise Value / TTM Free Cash Flow.

Worldwide PC Sales Were Down Slightly In The Second Quarter (Various and BI Intelligence)
Bad news for Microsoft:

  • Gartner reported that second quarter PC sales fell 0.1% from last year to 87.5 million units. Hewlett-Packard maintained the top spot in the world even as its total shipments fell by 12%.
  • IDC found the same decline of 0.1%, noting that it was below the company’s projection for 2.1% growth. U.S. PC sales fell 10.6%, worse than the 4.4% IDC was projecting.

That’s quite a few consecutive quarters of flat to declining growth.

Why A Microsoft – Nokia Merger Makes Sense (PC World)
Someone will likely have to step in to save Nokia, and Microsoft makes the most sense, because it has the most to lose from Nokia going under. Nokia is Microsoft’s biggest partner by far for Windows phones, and without Nokia, the struggling smartphone operating system won’t likely survive. And as the release of the Surface tablets show, Microsoft is willing to create its own branded hardware. What better company to do that for smartphones for Microsoft than Nokia?

Microsoft Whacks Ad And Marketing Jobs (The Wall Street Journal)
Microsoft said it cut advertising and marketing positions yesterday as it “works to align the business to key priorities.” That’s one way of putting it. Last week, the company announced a $6.2 billion accounting charge in its Internet division; an admission that Microsoft’s online businesses aren’t living up to the company’s expectations. A spokesperson said, “I can assure you we’re thinking about the exciting new opportunities that Windows 8, Xbox and Skype present for our advertising and marketing partners.” Let’s hope.

Microsoft Reaches All-Time High Search Share (comScore)
Bing has had 26 straight months of either flat or rising market share. Microsoft’s search engine reached 15.6% share in June, up from 15.4% in May. Google reached 66.8%, up from 66.7% in May. Both are all time highs. Yahoo, on the other hand, was down to 13%. That is the 10th consecutive declining month in which the company has fallen. This trend has been playing out a while now. Google and Bing pick up a little bit of share, Yahoo loses a little bit. Considering how much money Microsoft has invested in Bing, it has to be disappointing that Google isn’t losing share.

Microsoft Finally Getting Out Of MSNBC Website Partnership (The Daily Beast)
NBC and Microsoft plan to announce a deal to finally part company, with the network buying back the remainder of their MSNBC website from the software giant, say people familiar with the matter. The announcement of the corporate divorce is expected within days, although there could always be a last-minute snag. The cable channel MSNBC was originally a joint venture between the broadcast network and Bill Gates’ company, but the television partnership was dissolved in 2005. The companies, however, remained 50-50 partners in the website.

Here’s How Amazon Can Take On The Mobile Phone Market (Crash Dev)
It won’t be easy, but there’s a way for Amazon to do something entirely different and incredibly disruptive. Amazon’s Kindle Fire launch sent a clear message: Amazon is playing to win in this new, vertically integrated mobile device / OS / media war. And it will be Jeff Bezos’ favourite play: minuscule margins and massive patience. We’ve seen glimmers of Amazon’s mobile strategy already:

  • By pricing Kindle Fire at BOM they quickly became the best-selling Android tablet on the market, betting that they’d make up the lost margin in increased share of wallet over time.
  • Experiments with ad-supported Kindles have allowed Amazon to test the waters for other types of hardware subsidies that boost lifetime value while keeping retail hardware prices low.

If you take these ideas to their logical conclusion, it’s not hard to imagine Amazon pulling the biggest move of all: giving away a pretty good smartphone, along with unlimited voice calling, completely free.

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