Microsoft, with its global dominance in PC software, is sometimes said to have a license to print money. But Microsoft might find it tougher to deploy its cash hoard of $49 billion.
When it released fiscal-year 2003 results last Thursday, Microsoft said it added $2.9 billion of cash in the quarter ended June 30. It earned $689 million from investments, nearly one-third of its pre-tax income, according to its fiscal fourth-quarter income statement. And on its balance sheet, Microsoft reported $13.7 billion in equity and other investments for the period ended June 30, 2003.
This Thursday, at its Redmond, Washington, campus, Chief Financial Officer John Connors is expected to tell analysts how Microsoft invests its cash.
After years of struggling to enter the lucrative cable market, Microsoft this week announced major deals with cable giants AOL Time Warner and Comcast. Both companies will field test Microsoft's latest Interactive Program Guide (IPG) and Microsoft Foundation Edition software for cable set top boxes, which will let the cable giants deliver advanced client-side features, interactive advertisements, video on demand, and other functionality. Microsoft's software is geared toward digital cable services, a rapidly growing market.
A California judge on Friday gave preliminary approval to a landmark settlement under which Microsoft will pay $1.1 billion to settle a class-action suit that claimed it overcharged consumers for Windows.
The ruling by San Francisco Superior Court Judge Paul Alvarado allows the settlement to proceed to the next step, during which consumers and corporations in the state will be notified that they may qualify for vouchers ranging in value from $5 to $29. The vouchers can be used to buy most hardware or software products from any manufacturer.
You don't hear much from the Linux-loving mainstream press, consider the following. Remember that story about the city of Munich choosing Linux to power 14,000 desktop computers? One aspect of this story that most people don't know about is that up to 80 percent of those Linux desktops will be equipped with VMWare, a virtual machine emulator, under which they will run Windows and Windows applications. That's right, folks: The majority of those "Linux desktops" will be used to run . Windows. I'm not a big fan of Gartner, but they've issued a report, correctly titled, "Munich's Choice Doesn't Prove Linux OK for General Desktop Use," that raises some interesting issues. First, many of the Windows desktops they're migrated are very old Windows versions like Windows 3.1, making the switch to Linux less painful (it would be equally painful to switch to XP). Gartner says the cost of switching to Linux will cost 30 million Euros, or 3 million Euros more than it would cost to switch to XP, not including any steep discounts Microsoft would have no doubt provided. And finally, because most of the Linux machines will use VMWare to run Windows anyway, Linux is really being used as a hosting environment, and not as a replacement. In other words, this isn't exactly a good business case on which other companies can base a decision to migrate to Windows desktops. And, not coincidentally, that's why we're not reading about a lot of other high-profile Linux switchers.
Another strong quarter of earnings helped push Microsoft's legendary cash stockpile to more than $49 billion, but the company resisted pressure to give more of that money back to its shareholders in the form of a larger dividend.
Microsoft yesterday reported net income of $1.92 billion, or 18 cents a share, for its fourth fiscal quarter ended June 30. That was an increase of more than 25 percent compared with its net income of $1.53 billion, or 14 cents a share, in the same quarter last year.
But the Redmond software company did not boost its annual dividend beyond the 8 cents a share it announced earlier this year. That possibility received widespread attention leading up to the earnings release, including a Barron's magazine cover urging Microsoft Chairman Bill Gates -- drawn clutching a bag of money -- to "share the wealth."
It's the next big Linux controversy: Who should be liable if customers wind up using software that was created from misappropriated intellectual property? Linux resellers are not especially eager to tackle the question, but they know it lurks just over the horizon, thanks to the filing of the SCO-IBM lawsuit earlier this year. Ever since then, chief information officers have been reading that they could be vulnerable to future litigation for using open-source software.
None of this has escaped the attention of Microsoft and other like-minded suppliers of proprietary software. They are making sure customers know all about the protection plans they offer in the event that a company winds up in this sort of legal bind.
Microsoft sold more Xbox video game consoles in the June-ended quarter than it had first expected, though a price cut midway through the quarter played only a small part, an executive said on Thursday.
While not breaking out the console's specific sales in the quarter, Microsoft said its Home and Entertainment division, which is primarily the Xbox operations, saw revenue rise 8 percent in the fiscal fourth quarter. In an interview with Reuters after Microsoft's quarterly earnings, Robbie Bach, the company's "chief Xbox officer," said the Xbox was gaining market share in the United States and Europe.
"Certainly the price cut probably had some effect, though I think most people would tell you the effect has been pretty modest," Bach said.
Microsoft has seen a 300 percent increase in the last three months of the number of Web sites hosted on its recently launched Windows Server 2003 software--with a considerable amount of the new business representing migrations from Linux, according to a survey published this week.
The figures are a win for Microsoft, which dominates the desktop operating system market but currently rates a distant second to the open-source Apache, often running on Linux, in servers. Open-source software is not controlled by any one organization, and can often be obtained and maintained far more cheaply than proprietary software.
Microsoft on Thursday reported an 11 percent rise in revenue to $8.07 billion for the fourth quarter ended June 30, 2003, compared with $7.25 billion in the same year-ago period. Operating income for the fourth quarter slipped some 23 percent to $2.19 billion as a result of $796 million in charges, mostly related to the settlement of the AOL Time Warner lawsuit. That compared to operating income of $2.87 billion reported in the prior year period.
Net income for the quarter was up at $1.92 billion, including $533 million in after-tax settlement charges, compared to the previous year's $1.53 billion, which included an $806 million after-tax charge for investment impairments.
Intel released a new Xeon processor this week for front-end servers and workstations with more on-die cache. The 3.06-GHz Intel Xeon processor with 1 MB of L3 cache complements the Intel Xeon MP processors released earlier this month for four-processor and larger servers.
The new chip for single- or dual-processor systems has a 533 MHz front-side bus, and is drop-in compatible with systems designed for the E7501 server chipset or the E7505 workstation chipset.
Suggested uses for the new chip include general purpose servers for Web hosting, data caching, search engines, security, streaming media and high-performance computing. The Xeon MP processors are designed for mid-tier and back-end applications, including ERP and databases.