Microsoft's Third Quarter Results: Uncollapsed

For a company whose cash cow is supposed to be collapsing, Microsoft seems pretty chipper. A pretty good third quarter shows that reports of Microsoft's demise are somewhat premature. Even the weak U.S. economy worked to Microsoft's advantage this past quarter.Over the past year, the dollar has collapsed compared with nearly every other world currency. That's been good news for Microsoft's overseas sales, which are done in the local currency. Transferred back to the good old USA, they convert to a bigger pile of dollars and make this quarter's results look great.

Although we may be on the rim of a recession, Microsoft's sales in the Windows and Office area stayed pretty solid. After traveling a long road, Microsoft's XBox business should finally be profitable this fiscal year. Server products and developer tools continue to be strong for Microsoft as well. As the economy weakens later this year, I wonder whether Microsoft can maintain those sales levels. Coming out of the recession, the same effect that boosted Microsoft's past quarter will work in reverse as the dollar strengthens.

The one Microsoft business group still bleeding money is online services. Given that Microsoft is a distant third place in this race, I suppose it hopes that the Yahoo acquisition will bump it up to a distant second behind Google. It still seems like it will be a nightmare to merge two different corporate cultures.

In an unrelated event, CEO Steve Ballmer said that Microsoft was willing to keep XP available past its drop-dead date of June 30 if customers wanted it, but customers aren't asking. Seriously, Steve? You haven't seen the Save XP petition? Maybe he's right; they're not asking, they're begging.