December 20 news, according to foreign media reports, Microsoft is making great strides in the field of cloud computing, which will help the company and Google, Apple and cloud computing service provider Salesforce. Com starts to compete, but at the same time it will also hurt its profitability.
After becoming a paying user, corporate customers can use Microsoft's cloud computing software to do many things, such as managing corporate spreadsheets and websites. The new service also helps users watch TV programs and edit photos over the Internet.
Goldman Sachs analyst Heather Bellini pointed out that although this may be good news for customers, due to the storage and operation of cloud computing software in Microsoftâ€™s data center, this cost plus other costs mean Microsoft may not be able to achieve its fiscal 2012 profit forecast.
Jason Maynard, an analyst at Wells Fargo Securities, also said that the era of high profit margins for Microsoft is over. He said: "The profit rate will not be as high as before."
Microsoft's fiscal year 2011 profit margin fell to the lowest point in 22 years, and is expected to further decline. According to analyst averages compiled by Bloomberg, Microsoftâ€™s gross profit margin for fiscal 2012 is expected to fall by 1.6 percentage points to 76%. Microsoft's gross profit margin for fiscal year 2011 has dropped by 2.4 percentage points.
The challenge for Microsoft's profitability comes from CEO Steve Ballmerâ€™s decision to invest in new business in recent years, such as adding new content to the game console Xbox, and investing US$8.5 billion in the acquisition of VoIP company Skype. Wait.
Rising costs As more and more customers choose to use cloud computing services, it is expected that the pressure from rising Microsoft costs will continue beyond this year. Microsoft provides cloud computing services, must use its own server support software, and provide services through the Internet, so that the cost of customers to store and run software transferred to Microsoft.
Traditionally, Microsoft sold packaged software. Once the software was developed, the costs of manufacturing and selling were very low. In order to attract customers to use more of its cloud computing services, Microsoft must bear the cost of data center operations. These costs include power supply, cooling, property and maintenance server costs.
Mark Moerdler, an analyst at Sanford Bernstein, an American investment company, estimates that cloud-related costs account for 15% to 25% of Microsoft's revenue. He said that this is about 10% higher than selling standard packaged software.
Goldman Sachs's Bellini said that analysts are predicting that Microsoft will not consider the impact of Microsoft's sharp increase in sales costs during the fiscal year ending in June next year. This may lead to Microsoft's failure to achieve its fiscal 2012 earnings forecast. Although Bellini lowered Microsoftâ€™s gross margin expectations and lowered his full-year earnings forecast for the company by 9 cents per share, she said that the reduction may not be enough.
Microsoft declined to comment.
Challenges to growth Walter Price, portfolio manager at RCM Capital Management, said that the pressure on margins has led some investors to be cautious about Microsoft's stock and may put pressure on Microsoft's share price in the coming months.
Microsoft's share price rose 1.7% on US time on December 16th to 26 US dollars, and it has fallen by 6.8% this year.
This year, Microsoft's profit growth faces many challenges. The European debt crisis and weak economic recovery prompted government and financial customers to cut spending, while the PC industry was also affected by the decline in hard drive output caused by the flood in Thailand.
Market research firm Gartner once predicted that the growth of enterprise software and computer spending in 2012 will be lower than this year, and now it said it may further reduce its expectations at the end of this month. Hewlett-Packard, the world's largest computer maker, said last month that it found that companies are limiting spending.
Xbox content costs Rick Sherlund, an analyst at Nomura Securities, pointed out that Microsoft's product cycle indicates that its Windows software and Office software business will experience a year of slowing growth. As customers wait for the launch of a new generation of Windows operating systems, the growth of these two businesses will be even slower in FY2012. Schlund expects that Microsoft will launch a new generation of Windows operating system in October next year, and will likely launch Office software for touch screen products later.
At the same time, the costs of Microsoft's businesses are rising. Microsoft Xbox game consoles are booming, but their production costs are higher than software, and they have to pay higher licensing fees for content served by Xbox Live.
In addition, the acquisition of Skype increased the demand for consulting services from its server business, as well as the cost of cooperation between Microsoft and Yahoo in the search field, all of which led to a substantial increase in the cost of Microsoft.
Size Needs Microsoft said in October this year that, including the impact of Skype, Microsoft's operating costs for fiscal year 2012 will be as high as $29.2 billion, which is higher than the previous forecast of $28.6 billion.
The cost of controlling cloud computing will be the key, which will depend on the efficiency of Microsoft running its huge data center. Modler pointed out that Microsoft's cloud computing services need to attract a large number of customers in order to achieve economies of scale. He also believes that Microsoft also needs to pay attention to its data center energy and cooling costs.
Modler said: "They should be able to improve the efficiency of their data center operations, so as to obtain more profits, so even if the profit rate decline, their earnings per share will still increase." Modler's point of view with Microsoft since the start of the cloud The predictions made by the service have been consistent with their own predictions.