Microsoft's Windows disappoints on lukewarm PC sales


By Bill Rigby

SEATTLE (Reuters) - Sales of Microsoft Corp's Windows software fell short of outsized expectations, rekindling fears that the spread of mobile gadgets will erode its main PC-focused business.

Microsoft surprised Wall Street with a better-than-expected profit, helped by resurgent corporate spending after the belt-tightening of past years. But its shares stayed flat as investors expressed concern about the weakness of overall computer sales amid a faltering U.S. recovery.

The world's largest software maker, whose Windows operating system runs on 90 percent of the world's computers, is heavily dependent on PC sales, which grew only 3 percent in the quarter. Now it is starting to feel the heat from investors eyeing the phenomenal take-up of Apple Inc's iPad.

"Outstanding numbers when you take a first look at it, but when you delve into them, Windows missed expectations by $300 million," said Brendan Barnicle, analyst at Pacific Crest Securities.

Sales of smartphones and tablets are expected to grow much more quickly than PCs over the next few years, posing a threat to Microsoft's key market.

With the migration to mobile devices from desktop computers expected to accelerate, Apple overtook Microsoft to become the largest U.S. technology company by market value last May.

But some analysts argued that fears of tablets and other hot-selling gadgets replacing PCs were overblown -- at least for now.

"We've gotten over 300 million Windows 7 licenses sold. I mean, PCs are not disappearing. Put that into perspective with 7 million tablets sold last quarter from Apple," said BGC Financial's Colin Gillis.

"Clearly there are disruptions in the landscape, but some of the negative viewpoints are overblown."

Microsoft stock is down about 3 percent over the past 12 months, compared with a 24 percent gain for the tech-heavy Nasdaq. Apple shares are up 65 percent over the same period.

EARLY RELEASE

The results surprised the market after being discovered online by data search firm Selerity, which posted profit and revenue numbers on Twitter at 2:50 p.m. EST.

Trading in Microsoft's shares spiked just under an hour later, after blogs and news agencies started reporting the earnings from the web page discovered by Selerity, sending the shares up as much as 2 percent to $29.46. They ebbed back to $28.87 at the close, a 0.3 percent gain for the day. They drifted slightly lower in after-hours trading.

"A preproduction draft of our earnings release was discovered by one or more media sources who then published our results to the web before market close," said a Microsoft spokesman, who apologized for any confusion and said the company was reviewing procedures to make sure it does not happen again.

WINDOWS FALLS SHORT

Though Microsoft faces longer-term challenges in the PC arena, its other core product, its suite of Office applications, generates strong cash flow.

Sales at its Office unit rose 24 percent to $6 billion, indicating that U.S. businesses are starting to spend more on technology after the recession.

But consumers are proving less resilient. U.S. initial jobless claims surged in the latest week to their highest since October, indicating that any recovery in consumer spending will come only in fits and starts.

Sales for its Windows unit fell 30 percent to $5.054 billion, a little short of analysts' expectations of about $5.3 billion, due to the lukewarm growth in PC sales. The year-ago figure was swollen by $1.71 billion in deferred revenue and pre-sales from the launch of Windows 7.

The perennially money-losing online services division, home of the Bing search engine, posted a 19 percent increase in sales, but saw its loss widen 17 percent to $543 million. The unit, which is making only slight headway against Google Inc, has lost more than $6 billion in the last five years.

Unearned revenue -- a measure of the strength of the business in Microsoft's pipeline -- fell 9.5 percent to $13.4 billion, a cause of concern to some investors.

KINECT BEST HOPE?

Microsoft reported overall fiscal second-quarter profit of $6.63 billion, or 77 cents per share, compared with $6.66 billion, or 74 cents per share, a year earlier. The per share figure was higher due to a reduction in shares outstanding from last year.

Wall Street was expecting 68 cents per share profit, according to Thomson Reuters I/B/E/S.

Sales rose 5 percent to $19.95 billion, helped by strong sales of its Kinect hands-free gaming system and Xbox consoles, handily beating analysts' average estimate of $19.15 billion.

"Kinect represents the most legitimate opportunity we have seen for the Xbox to drive some profit. I do think there is a meaningful catalyst there," said Motley Fool senior analyst Tim Beyers. "The Windows phone looks good. I do think that Windows Phone 7 is proving to be an interesting alternative to the Blackberry.

"I guess the nut of it is, Microsoft is starting to do something better and they are not tripping on themselves, and that counts for something."

Microsoft now has $41.2 billion in cash and short-term investments on its balance sheet. Chief Financial Officer Peter Klein said he was happy with the cash it is distributing to shareholders, holding out little hope of a dividend hike, which some investors would like to see.

(Editing by Edwin Chan and by Phil Berlowitz)
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News Corp to launch iPad newspaper on February 2

NEW YORK (Reuters) - News Corp will launch its long-awaited digital newspaper created for Apple Inc's iPad on February 2, two weeks after the two companies were widely expected to introduce the new product.

News Corp Chairman Rupert Murdoch and Apple Vice President of Internet Services Eddy Cue will introduce the Daily, a digital newspaper for tablet devices, at the Solomon Guggenheim Museum in New York.

The event invite, emailed to reporters on Thursday, caps weeks of speculation surrounding the Daily.

Murdoch and Apple Chief Executive Steve Jobs were originally scheduled to launch the Daily in San Francisco in January 19. But the event was postponed, because of technical glitches, according to sources familiar the event.

Days later, Apple disclosed that Jobs was taking medical leave for the third time since 2004.

The Daily will cost 99 cents per week, News Corp executive James Murdoch said.

News Corp is a making a big bet that starting a newspaper from scratch that is dedicated to tablet devices could help revive the news business.

The digital-only publication, available initially only in the United States, represents News Corp's latest attempt to get consumers to pay for its online news and support investment in journalism -- a strategy that is being closely watched.

Magazine and newspaper publishers are hoping that tablet devices such as the iPad and Samsung Electronic's Galaxy Tab will spark consumer interest and revive the business beset by declining circulation and advertising revenue.

Many newspapers, for instance, are experimenting with models that require some form of payment to access online news as an additional revenue stream to advertising. Newspaper online advertising in the U.S. represents only 11 percent of total newspaper advertising, according to the latest figures from the Newspaper Association of America.

Earlier this week personalized news service Ongo funded by the New York Times Co, Washington Post Co and Gannett Co launched in an attempt to get readers to pay for online news. The subscription service is accessible through web browsers, smartphones and tablets.

(Reporting by Jennifer Saba; Editing by Phil Berlowitz and Derek Caney)
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Microsoft sells 2 million phone software units

SEATTLE (Reuters) - Microsoft Corp sold more than 2 million units of its new Windows Phone 7 software to handset makers last quarter, a strong start for the new software launched in October, but still far behind Apple Inc's iPhone and Google Inc's Android system.

The world's largest software maker, which licenses the technology to handset makers such as Samsung Electronics Co Ltd, LG Electronics Inc and HTC Corp, also said there were now more than 6,500 apps for download by users from its online marketplace.

"The numbers show pretty good momentum on the sales of the platform," said Al Hilwa, an analyst at tech research firm IDC. "Anecdotally almost everyone who has seen the phone has commented on the style and fluidity of the interface. The apps numbers are excellent for this early stage of the lifecycle."

Despite the strong start, Microsoft still lags its main rivals in the smartphone market.

Apple said last week 16.2 million iPhones were sold in the last quarter. Research in Motion Ltd said in December it sold 14.2 million of its BlackBerry smartphones in the quarter ended November 27.

Google, which gives away its Android system to phone makers for free, says 300,000 Android devices are sold daily, which suggest more than 9 million are sold a month.

Microsoft is set to report quarterly earnings on Thursday. Its shares closed up 33 cents, or 1.2 percent, to $28.78 on Nasdaq.

(Reporting by Bill Rigby, editing by Gerald E. McCormick and Carol Bishopric)
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Google hires, but Yahoo fires

SAN FRANCISCO (Reuters) - Yahoo Inc is planning its second round of layoffs in six weeks, while rival Google Inc is preparing its biggest-ever year for hiring, underscoring the divergent paths of two of the Internet's biggest names.

Yahoo said on Tuesday it will cut 1 percent of a global workforce that stood at about 14,100 at the end of the third quarter, just weeks after announcing it would lay off about 4 percent, or roughly 600 people, from its workforce.

In an official blogpost on Tuesday, Google said that 2011 will set a record in terms of hiring -- surpassing 2007, when it added more than 6,000 people to its roster, and last year, when it tacked on about 4,500.

"I am excited about 2011 because it will be our biggest hiring year in company history. We're looking for top talent across the board and around the globe," Google Senior Vice President of Engineering and Research Alan Eustace said.

News of Yahoo's latest layoffs come hours before the Web media company is due to report fourth-quarter financial results after Tuesday's market close, with analysts expecting revenue to decline roughly 5.6 percent year-over-year.

Yahoo spokeswoman Dana Lengkeek told Reuters in an email statement that the latest cuts are part of the company's strategy to position itself for net revenue growth and margin expansion, and that Yahoo will continue to hire to support key priorities.

The company would not say exactly how many employees would be laid off in the latest round of reductions. In December, the Web portal said it would lay off about 4 percent of its workforce, mostly in Yahoo's product group.

Its share were down roughly 1 percent, or 13 cents, at $15.96, in afternoon trading on Tuesday. Google stock was up 0.9 percent at $616.75.

(Reporting by Alexei Oreskovic; editing by Andre Grenon and Gerald E. McCormick)
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Garuda, You're Never Walk Alone

Di Istanbul tahun 2005 sebuah tim bernama Liverpool tertinggal 3-0
pada 45 menit pertama, tetapi mereka tidak menyerah. Diseberang ruang ganti, para Italiano Milan berpesta seolah Gelar Liga Champion sudah ditangan mereka.

Tetapi ketika masuk kelapangan, seorang. Paolo Maldini pernah bersaksi bahwa dia merinding mendengar lagu "U're Never Walk Alone" membahana di stadion. Kakinya seakan kaku dan bergetar.

Sementara para pemain Liverpool tampil kesetanan di 45 menit kedua,
score akhir 3-3 dan Liverpool menang adu penalti, menyisakan tangis di
mata Paolo Maldini dan Kiper Dida.

Hari ini, tanggal 29 Desember, Safee dan Idlan akan bergetar kakinya,
menciut nyalinya ketika mendengar lagu "Garuda di Dadaku" membahana di Gelora Bung Karno (GBK).

Timnas Indonesia akan mencetak 3 gol seperti yang dilakukan Gerrard dkk dalam kurun 45 menit, sementara kita diberi waktu lebih panjang 90 menit untuk membalas.

Mari kita sisakan tangis air mata di mata Safee dan Idlan, juga para
pemain Malaysia lainnya.
"Garuda, U're Never Walk Alone!"
De Ja Vu Istanbul Mei 2005 at GBK !!!

Bismillah, ALLOH bersama kita, #indonesiapastibisa
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Apple's iPad unearthed: Samsung, LG appear

(Reuters) - Luke Soules was one of the first on the planet to get his hands on an iPad. And he wasted no time taking it apart.

After staking out three locations in the Eastern United States, Soules -- co-founder of teardown firm iFixit -- cracked the device open on Saturday to unearth NAND flash memory by Samsung Electronics, an LCD display from LG Display and microchips from Broadcom Corp, Texas Instruments Inc and NXP Semiconductor.

Soules and his outfit provide and advise on components in Apple gadgets -- and also identifies them. The work of teardown firms such as iFixit may prove crucial in identifying which manufacturer gets its parts into a device expected to sell upwards of 5 million units in 2010 alone.

Soules had slept overnight in the parking lot outside an Apple mall store in Richmond, Virginia. He was the first to walk out of the store, moments after the outlet opened at 9 a.m., iPad in hand.

Store employees clapped and gave him high-fives. He grinned, but moved quickly. There was work to do.

Without a second's dawdling, Soules hopped in a waiting car and raced a few short miles to the house of a friend, where he had his tools of destruction ready to go. He barely paused to admire the iPad out of the box. He didn't even turn it on.

The secretive Apple is famous for designing sealed-up devices intended to discourage nosy gadget heads from poking around in them, and the iPad was no different.

The iPad had no screws. But working with a tool called a spudger, it took Soules only 10 minutes to separate the iPad's handsome, 9.7-inch facing from its silver-backed casing.

He surveyed the iPad's design, a maze of parts that would be utterly inscrutable to most people.

"That's very, very nice," he said almost reverentially.

IPAD'S SOUL

Teardown firms are hired by an array of clients, their data used for competitive intelligence, in patent disputes or to keep current on industry benchmarks.

By 9:30 a.m., Soules had turned the iPad inside out and was sharing its secrets with the world.

There is strong competition to be first to tear open Apple devices and reveal the design, chips and components within and iFixit has gained a measure of fame for their work.

Months of anticipation had built ahead of the iPad launch and -- at least in technology circles -- almost as much excitement about what's on the inside of the device.

Within 45 minutes, iFixit had left the iPad -- the gleaming symbol of Apple's technological wizardry -- in tatters, its various parts naked against a crisp white backdrop.

Soules moved at a rapid clip, narrating as he took pictures and streamed to colleague Kyle Wiens and others in California, who were posting them online and helping identify parts.

IFixit's near-live teardowns have become staples for gadget fans during Apple product launches.

As a veteran of many previous efforts, Soules was prepared for any tricks Apple might throw his way, but the iPad didn't prove to be too enormous of a challenge to take apart, as some of previous devices have.

Soules had removed the main circuit board of the iPad by 10 a.m. The 4-inch long, 1-ounce board was covered by an electromagnetic interference shield, and underneath were all the microprocessors that make the device tick.

"The vast majority of the brains of the iPad are on this little board. It's amazing what they can fit into such a small space," Soules said.

DEVIL IN THE DETAILS

One of first identifiable parts was the NAND flash memory, which was made by Samsung, which has supplied components for other Apple devices. Soules also quickly noted chips from Broadcom, Texas Instruments.

There were also at least three chips carrying Apple branding. Apple is known to hide the identities of some chipmakers in its products by having them stamp an Apple logo on their parts. The main iPad chip is an Apple creation; its very own A4 processor controls the iPad's programs.

IFixit determined that Samsung is manufacturing the A4 chip for Apple.

After removing the circuit board, Soules dug in further using a Torx screwdriver to manipulate the minuscule screws inside the iPad. His fingernails gingerly pried open casings.

"The teardown process is bit easier if I keep my fingernails on the long side," he said.

Soules discovered the iPad's battery is not soldered into place, which means that replacing it is possible for the do-it-yourself crowd. IFixit promotes device repair as a way to cut down on electronic waste.

Apple requires users to mail iPad units back to the company, which will change the battery for a hefty fee.

By 10:45 a.m. Soules was cautiously fiddling with the iPad's display, the most expensive component.

While he was unable to determine who made the display on his unit, another iFixit teardown at a different location revealed one from LG, meaning Apple could be using displays from more than one supplier.

Besides Richmond, iFixit had also ordered iPads at addresses near Indianapolis and Orlando, Florida. The company had people in both areas, home to FedEx shipping hubs.

IFixit thought it might be able to get a few hours jump on the competition by staking out the FedEx hubs the morning of the launch, to intercept one of the devices.

But that didn't pan out, so they resorted to standing in line -- at the head of the line actually -- in three cities.

The Federal Communications Commission also managed to steal at least some of iFixit's thunder. Bloggers discovered on Friday that the FCC had posted pictures of the insides of pre-production iPads on its Web site, despite the fact that Apple had requested that they keep them confidential.

IFixit spent much of the night identifying the parts, which were not necessarily the same as those in real iPads.

By noon on Saturday, the bulk of the iPad teardown was done. But there will be at least another week of analysis, using sophisticated equipment that can cut into components to determine how they were made, and who made them.

(Editing by Edwin Chan and Todd Eastham)

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iPad to hit stores Saturday as consumer test begins

(Reuters) - After months of hype, speculation and secrecy, Apple Inc will finally put the iPad tablet to the test that truly matters: the buying public.


IPad sales are widely expected to rocket out of the gate this Saturday, helped by the scores of core Apple fans who are expected to line up hours before U.S. stores open at 9 a.m. on the East Coast, to be among the first to play with the new gadget, which costs a minimum of $499.

Although those who preordered the iPad will be able to pick it up on April 3, those placing online orders more recently have been told that their device may not ship until April 12.

But putting the launch hype aside, what is less certain is whether the iPad can attract a mainstream following beyond the first few months of excitement and into next year, defining a new category of devices that bridges the gap between a smartphone and notebook computer.

Apple's shares have soared to record highs as analysts add the iPad to their earnings estimates and amid reports of brisk preorders. But forecasts for first-year sales vary widely -- from 2 million to 5 million units -- reflecting the difficulty in predicting the size of a yet-to-be-proven market.

Never lacking for ambition, Apple is offering the iPad as a new type of media device that fuses the mobility and simplicity of a smartphone with the speed and screen-size of a laptop.

"It's high-risk, high-reward because given the narrowness of Apple's portfolio, if you bring out a product that falls on its face, it does damage to you," said Gartner analyst Van Baker, who expects the iPad to be a hit.

The iPad resembles a large iPhone, with a 9.7-inch touch screen, and can run most of the 100,000-plus applications, games and entertainment that have made the iPhone so popular.

It is a typically sleek Apple creation at a half-inch thick and 1.5 pounds, with WiFi and 10 hours of battery life. Wireless-compatible 3G versions will come later in April, with the most expensive model topping out at $829.

Technology enthusiasts have praised the iPad's beautiful screen and fast Web browser, but also noted flaws: it does not have a camera for video chat, it cannot run more than one app at a time, and it cannot view popular video sites such asHulu.com, which use Adobe's Flash software.

These early reviews were based on brief tests after Apple Chief Executive Steve Jobs unveiled the iPad in January. Influential columnists such as Walt Mossberg of the Wall Street Journal and David Pogue of The New York Times have yet to weigh in -- and they could help sway iPad sales for those outside the tech cognoscenti.

MEDIA DEALS

Another factor that will affect sales is how many media companies Apple is able to eventually bring on board. Companies such as Sports Illustrated publisher Time Warner Inc and Wall Street Journal publisher News Corp are planning digital editions for the iPad, although Apple's talks with some others have reportedly been bogged down by pricing.

Apple is also launching its own digital book business to compete with the Kindle from Amazon.com Inc and other e-readers and e-books.

If the iPad is successful, it could set the standard for a wave of tablets later this year from rival vendors including Hewlett-Packard Co and Dell Inc, and provide a bridge for print media to a digital future.

Given Apple's track record in making category-defining products, the bar is set high for early iPad sales. IPhone sales passed the 1 million mark 74 days after it launched in 2007, and it sold more than 2 million in the holiday quarter that year after a big price cut in September 2007.

Apple has sold more than 40 million iPhones in the less than three years it has been on the market.

Barclays Capital analyst Ben Reitzes estimates 1.2 million iPad sales in the June quarter, and Broadpoint Amtech analyst Brian Marshall is predicting 850,000 units. Both noted that their estimates could prove to be conservative.

"I think we need Joe Six-Pack in the retail stores touching the iPad to understand the true importance of it. Then a light bulb will go off and he'll say 'a-ha!,'" Marshall said.

He expects the iPad to quickly become a new growth line for Apple, adding $2.4 billion in sales this calendar year and 65 cents to earnings per share. For the fiscal year ending in September, Wall Street expects $54.1 billion revenue and EPS of $11.68.

Marshall estimated the iPad's gross margin at 50 percent, less profitable than the iPhone's 60-percent plus, but far more lucrative than iPods and Macs at roughly 30 percent.

Since hitting a three-month low in January, Apple shares have risen more than 20 percent to about $233. More than a dozen analysts have lifted their price targets since the iPad unveiling, and the median target now sits at about $260.

Research group ComScore recently released a survey showing 15 percent of respondents were "seriously" considering buying an iPad in the next three months.

"Steve Jobs has a very good feeling for what makes sense for the consumer," said Tim Bajarin, president of consulting company Creative Strategies. "He's not going after the tech crowd with the iPad, he's going after the mainstream consumer.

"The first six to nine months, it will come out of the block fast, but the measure of success will be how it's doing after its first full year," he added.

(Reporting by Gabriel Madway, editing by Tiffany Wu and Maureen Bavdek)

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