Microsoft Q4 results, looks good.

Microsoft came out with their fourth quarterly results yesterday which looked impressive but showed a shift in the business somewhat which I guess was expected. They managed to grow profits by 30% with quarterly net income coming in at $5.9bn. Revenue rose 8% from last year to $17.37bn. Where these revenues came from is what interested me and how each sector in this company acts as a proxy for the general market in some aspect because it is such a big and dominant player.

Long term contracts purchased by big cooperate companies was the biggest revenue driver. This sector beat expectations showing that corporations were still investing in capital and Microsoft was still the dominant player in serving corporate information technology departments. Its business division, the one that is responsible for Office also managed to grow 7%, contributing $5.78bn to revenue. Office 2010 has been a success managing to fight off free services from Google.

Where the company struggled and where this was to be expected was within its key Windows business where revenue fell 1% to $4.74bn. This is because of the introduction of the tablet and let's be honest when I say tablet I mean iPad. There are a few tablets that run Windows 7 but these have not sold well. We saw in the Apple results that they sold 9.25 million iPads during the quarter. That is $6bn which could have been allocated to notebooks. Sure some people own both and not every iPad bought is a notebook lost but it has definitely made a significant impact.

It is also a fantastic example of how, even when you have a monopoly over an industry, innovation can change the dynamics of that industry. In this case it wasn't a new and better operating system which took Windows on but a whole new product which challenged the hardware on which Windows operates. Again it reiterates that in the technology sector you have to be on top of your game and cannot turn a blind eye for a second, even if you think you have a monopoly.

Not all is lost and the company still has some exciting prospects. The Xbox games system is doing very well growing revenue by 30%. They have definitely got it right in that division. We also have the Windows mobile operating system to look forward to. Remember they have partnered up with Nokia and I believe that is going to be rolled out pretty soon.

Is Microsoft a good investment? Since pioneering the original operating system they seem to be playing catch up. The company looks cheaper than the other tech companies so a value investor might be intrigued but myself personally, not so much. They have the artillery to grow but they just haven't shown the innovation of a Google or an Apple. I'd rather be in those companies.