You're not supposed to start articles with a big string of facts, because people get overwhelmed. I think we can all manage this one time.
Microsoft (NASDAQ:MSFT) made $7.7 billion in operating profit last quarter.
- The largest chunk of that, $3.5 billion, came from the business division.
- Windows accounted for $3.2 billion, and servers added another $2.1 billion.
- A version of Windows runs on over 80% of the world's desktop and laptop computers.
That was the "good news" part, where people who like Microsoft said, "Yeah!" and people who hate it said, "Who cares about desktops -- it's all tablets and phones now." Fair enough. PC sales are down 14% compared to last year, and Hewlett-Packard reportedly shipped 24% fewer PCs in the quarter than it did last year.
The fall in sales is being placed squarely on the shoulders of Microsoft, and the end of the PC is supposedly just around the corner.
The worst-case scenario
Given all of the above, what can go wrong? Maybe this is the end of the PC, and starting in three years we're all going to be building spreadsheets and writing papers on tablets. Maybe Windows 8 is even worse than Vista, and is doomed for failure. Maybe HP and Dell both have to sell themselves off to survive. What then?
Well, Microsoft would still have a multibillion-dollar business-services business, a multibillion-dollar server business, and a multibillion-dollar entertainment business. On top of that, the chances are that it would make something work on tablets. While the Surface hasn't taken off, Microsoft is rumored to be trying a smaller version to see if that clicks with customers.
Windows 8's success or failure doesn't spell the success or failure of the company as a whole, it's just one piece of a very big puzzle.
The more likely scenario
Instead of the above, what we're likely to see is an increasing use of tablets for entertainment tasks, with fewer PC being used for bigger entertainment or work purposes. That's just fine for Microsoft, which will eventually find a way to make its tablet software more palatable to consumers. CEO Steve Ballmer has said that he sees no line, in the future, between hardware and software. That means that Microsoft will likely have a role to play regardless of what the physical device looks like.
As a last note, Microsoft isn't the kind of company I'd buy because it's going to blow up overnight. In the last five years, the stock is up 1.7%. I'd buy Microsoft because it's the kind of company that I believe will be around in 25 years. I don't know what it will look like, but I trust that it will find a way to remain relevant. As an investor, there's a lot to be said for that.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.