Surface RT tanks Microsoft's earnings

Microsoft fell way short of analyst estimates for its fourth fiscal quarter, with revenues nearly a billion dollars short of what analysts had expected.

The culprit? Microsoft’s Surface RT tablets. A lack of sales forced Microsoft to take a $900 million charge, in addition to a previously deferred $782 million charge related to Microsoft Office.

Sources close to Microsoft said that the charge reflects the recent pricing changes for Surface RT.

Surface RT Microsoft reported net income of $4.97 billion (59 cents) on revenue of $19.90 billion, nevertheless, which showed strong improvements from a year ago. The company reported a 10.1 percent increase in revenue from a year ago, when Microsoft reported a loss of $492 million. For the fiscal year, Microsoft reported net income of $26.86 billion on revenue of $77.85 billion.

Analysts polled by Yahoo Finance expected Microsoft to report an EPS of 75 cents per share, on revenue of $20.73 billion.

Microsoft has struggled to convince consumers to support its newly released Windows 8 operating system, but the company recently released a preview of Windows 8.1 as a “do-over” to win back customers. Win 8.1 has customer-friendly features that include the ability to boot directly to the desktop, as well as a “start button” that takes them back to a reorganized Windows Start Page.

Steve Ballmer, Microsoft’s chief executive, took a forward-looking approach Thursday, pointing to the company’s recent reorganization as a recipe for success.

“We are working hard to deliver compelling new devices and high value experiences from Microsoft and our partners in the coming months, including new Windows 8.1 tablets and PCs,” Ballmer said in a statement. “Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most.”

Steve Ballmer

In a study conducted by online advertising network Chitika, the share of North American web traffic from Windows 8 operating systems has grown to 4.8 percent, the company said Wednesday.

"Windows’ hold on the continental desktop OS marketplace remains as strong as ever,” Chitika said in a statement. “While this is certainly good news for Microsoft, it is tempered by the continued growth of mobile web browsing, where the company is not as strong, along with the more gradual slope of Windows 8 growth rate within North America."

"However, Microsoft’s decision to make some changes to the recent Windows 8.1 update may spur more users to adopt the new OS, as the company has attempted to address some of the user concerns surrounding the initial version of the software.”

Microsoft’s Windows Division revenue grew 6 percent for the fourth quarter and 5 percent for the full year. Excluding the $540 million impact of its Windows Upgrade Offer revenue deferral, however, the Windows Division revenue would have decreased 6 percent for the fourth quarter and 1 percent for the full year.
Microsoft was also affected by the continued slide in the PC market, which has seen consumer buy tablets and phones rather than PCs. Amy Hood, Microsoft’s chief financial officer, said that Microsoft is instead investing in cloud services.

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter. We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE,” Hood said. “While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services.”

Microsoft’s traditional pillars of strength continued to buoy the company.

Microsoft’s Business Division reported the highest profits and revenue, at $4.87 billion ($4.1 billion a year ago) and $7.2 billion respectively ($6.3 billion a year ago).Server and Tools reported $2.3 billion in profits (versus $2.04 billion a year ago) on $5.5 billion in revenue ($5.1 billion a year ago).Microsoft’s Entertainment and Devices Division also saw its losses shrink from $252 million to $110 million, as revenues grew from $1.78 billion to $1.92 billion.Microsoft’s online business continued its money-losing ways, with a loss of $372 million on increased revenue of $804 million.Bing organic U.S. search market share was 17.9 percent for the month of June 2013, up 230 basis points from the prior year period, Microsoft said.

  “We continue to see strong demand for our enterprise products and services, with more and more customers making long-term commitments to the Microsoft platform,” said Kevin Turner, chief operating officer at Microsoft, in a statement. “The growing adoption of our cloud services, including Office 365, Windows Azure and Dynamics CRM, continues to demonstrate our leadership position in the cloud.”
Microsoft did not release a revenue outlook. 

'Shark Tank's' Barbara Corcoran 'Nervous' About 'Drop Dead Diva' Acting Debut

April Bowlby, left, and Barbara Corcoran
Barbara Corcoran is a pro at doling out business advice on ABC's Shark Tank, but when it came to playing a fictionalized version of herself on Lifetime's Drop Dead Diva, the real estate mogul found the job a little intimidating.

Her story line in Sunday's episode finds her giving advice to Stacy (April Bowlby) about her business, The Pakery.

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"This was my first acting experience, and based on the job I did, I think it will be the last," Corcoran quipped in an interview with The Hollywood Reporter. "I was nervous, flubbing my lines, doing them again and again and again. I can't imagine looking good, really." (While the charmingly self-deprecating businesswoman remains humble about her acting skills, she can rest assured that she has nothing to be embarrassed about.)

Ahead of her episode premiere, Corcoran talked to THR about why she signed on for the role, her love for the show and why she's sticking with unscripted TV from now on.

The Hollywood Reporter: How did this guest-starring role come about?

Barbara Corcoran: I am a fan of the show, but then who isn't? I got a call out of the blue, asking if I would consider a guest spot. It also happens to be the favorite show of three of the most loved people in my life -- two nieces and also my stepdaughter -- so I had to say yes.

THR: Are they excited to see your show?

Corcoran: I haven't told them. I'm going to call them the morning of; they're all busy and I want to make sure they see it. I'm going to surprise them, and we're going to watch it together.

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THR: Was it less intimidating since you were playing yourself?

Corcoran: Remember, I wasn't really playing myself. I was playing myself as a shrewd operator, as a shark; it was half real and half not real. It felt like acting because I had a script. What's great about reality TV is you say something only once, and you say whatever you want. But I realized when I got this gig, with scripted TV, I must have said every line 30 times -- different angles, different intonations, different camera people -- again and again and again. I'm never going to see a scripted show anymore without thinking that the actors are being underpaid. It's hard work. Reality TV is so much easier.

THR: Was the cast helpful in preparing you?

Corcoran: The minute I stepped onto the lot, everybody was acting as if they were waiting for me. They were so warm and welcoming. I got lucky because they all happen to be Shark Tank fans. After being on the set, I'm the biggest fan of Stacy because [Bowlby] was so terrific on the set. She's a real pro. I was awestruck at how good she was. It was the first time in my life I wasn't jealous of someone who looked as good as she looks. [Laughs.] That speaks a lot to her spirit. She was enormously generous in helping me out.

THR: Will you be pursuing any more acting jobs?

Corcoran: Let me tell you, I can't imagine anyone inviting me. We'll see, but I think reality TV is for me.

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THR: You've already started filming the next season of Shark Tank. Anything you can reveal?

Corcoran: We have two new sharks, as you know [Steve Tisch, chairman and executive vp of the New York Giants and partner at Escape Artists Productions, and John Paul DeJoria, co-founder of the Paul Mitchell line of hair products and the Patron Spirits Co.]. There are a couple of other surprises, but I've been forewarned not to spill the beans.

Drop Dead Diva, from Sony Pictures Television, airs at 9 p.m. Sundays on Lifetime. Watch a preview of Sunday's episode below.