Operating systems boost the bottom line for Apple and Microsoft

While I’ve been away on holiday and doing work things, both Apple and Microsoft have brought their long-awaited new desktop operating systems to market, along with a decent set of financial results.

Apple continues to be fuelled by runaway iPhone sales having chalked up 7.4 million sales in the last quarter alone. More importantly, Apple sold 3.05 million Macs in the same period. Over half shipped with the new Snow Leopard operating system and the rest qualified for a discount upgrade. The Mac shipments represented a 17 per cent increase on the same period the previous year, itself a record-breaking quarter for the company.

The release of a new operating system is always a great fillip for the PC industry as most consumers will use the opportunity as a hassle-free way to upgrade and a good excuse to replace their existing computer with a new model, rather than mess around with hardware upgrades in order to get the best out of a new platform, let alone installing from scratch and the driver challenges that brings.

Microsoft and the legions of PC box shifters will be hoping for a similar uplift following the release of Windows 7. Last week the Redmond giant saw fiscal first-quarter profit fall 18 percent to $3.57 billion, or 40 cents per share, compared with $4.37 billion, or 48 cents per share, in the same quarter last year. Sales fell 14 percent to $12.92 billion.

While most companies would kill to be making $3.57 billion profit in three months, the market simply will not tolerate such a massive drop in earnings from a new economy company that has been co-opted into the old economy world. Some on Wall Street had expected the drop to be even worse, but all are now hoping that Windows 7 produces a sales uplift not only for the software maker, but also for the likes of Dell, HP, Lenovo, Acer and so on, who rely on Microsoft’s OS to help sell ready-to-go computers to businesses and consumers.

With Windows Vista failing to capture interest from either the consumer or corporate world, and many PC makers still heavily pushing Windows XP instead of Vista (not to mention the fact that Vista is wholly inappropriate for netbooks, which have furthered sales of Windows XP even more), Microsoft needs Windows 7 to be a winner. Not only is it hoped that 7 will address the fall in sales and profits (Microsoft is not used to either falling), insiders are desperate to repair the damage to Microsoft’s reputation caused by Vista and by perceptions of Vista.

Perception has been the most damaging thing for Microsoft, with many people dismissing and criticising Vista without even using it. As someone who has been fortunate enough to play with Windows 7 since the pre-beta developer release, I can say with experience that it represents a significant improvement over Windows Vista in terms of stability, performance, driver compatibility and functionality.

Criticism can increase mass like a rolling stone over moss.
It will be another three months before we see the bottom-line effect of Windows 7 on Microsoft’s earnings, in a quarter that will also include the busy Christmas shopping period – not a coincidence – and the post-Christmas sales. The only thing we can be certain of is that it can’t get any worse.