For just a moment, Microsoft Corp. (NASDAQ: MSFT) may have emerged from Apple’s shadow yesterday. Apple disappointed Wall St. as it sold many fewer iPads than expected. Its growth was not colossal as usual. It announced quarterly revenue of $36.0 billion and a quarterly net profit of $8.2 billion, or $8.67 per diluted share. The results compare with revenue of $28.3 billion and net profit of $6.6 billion, or $7.05 per diluted share, in the year-ago quarter. Microsoft, however, received headlines nearly as prominent as Apple’s for the launch of Windows 8 and its Surface tablet. The sales rate of Windows 8 likely will be released by year’s end, and a strong performance could cause many people to believe Microsoft is back on the march to be a global leader in the tech field.
The demand for the iPhone and iPad may continue to falter through the holidays for several reasons. Most analysts agree upon one reason: Samsung and smaller rivals have fielded phones and tablets the consumers like. Apple also continues to fight Samsung over patents in courts around the world, but that blocking action can only work for so long. Another reason to worry about Apple is that all products reach a point of saturation. Apple is not there yet, but at some point it must be, given that it does not have an infinite customer base, particularly because of its premium prices.
The Surface is not likely to be a wild success. Microsoft is late to the tablet market, and Windows has not caught on much on mobile devices. But even a modest success for Surface would be an indication that Redmond can get into the mobile field. Microsoft also has relationships with Nokia Corp. (NYSE: NOK) and several other portables markets. These are unlikely to do extremely well, but they are a start.
Microsoft’s real victory will come with Windows 8, if the company is to have one at all. Pessimists about Microsoft’s prospects say that Apple’s Mac and early efforts by Google Inc. (NASDAQ: GOOG) to get its Android onto personal computers might bite at Microsoft’s position. But Windows could surprise the market if its new design and normal Windows upgrades help drive robust sales. And expectations for Windows Mobile are so modest that Microsoft may well top them.
Apple has experienced a very slight dip in its success. Microsoft has not proved that it can be turned around. But, for once in a long time, a race between the two has at least started.
Douglas A. McIntyre