Singh pointed out that while Windows revenue was up, profits were down: Windows' operating income, as reported in the old format, was down 20% from last year's $2.8 billion.
That wasn't unexpected, as hardware like the Surface incurs much higher costs than does software. The more Microsoft shifts to a device strategy — selling its own hardware — the higher those costs will climb. "The more you are into hardware, the lower the margin," Singh said. "The bottom line will go down as their product mix changes."
Amy Hood, Microsoft's chief financial officer, echoed that in the call with analysts Thursday. "In Devices and Consumer, the sequential change in gross margin dollars reflects the progress we are making towards our strategy of delivering a compelling family of devices and services," she said.
Surface revenue jumped to $400 million, Microsoft said in accompanying documents released last week, and the company sold twice as many of the tablets as in the second quarter. However, the company has never disclosed unit sales for the tablet line, so it's tough to suss out sales from the revenue number, what with aggressive price cuts to the Surface RT during the period, and less-dramatic discounts for the high-priced Surface Pro.
Office revenue was even harder to analyze under the new reporting regime, as sales — once limited to the Microsoft Business Division (MBD) — have been split between four of the five buckets: D&C Licensing, where consumers sales are allocated; D&C Other, which includes Office 365 Home Premium subscriptions, now up to 2 million; Commercial Licensing, where volume Office sales and Software Assurance income are recorded; and Commercial Other, which books enterprise Office 365 subscriptions.
According to the old format, MBD revenue — the vast bulk of it derived from Office — was up 5% over the same quarter of 2012, reaching $6 billion, with operating income up 1% to $3.9 billion. Both numbers were the largest for any of the old divisions, with MBD accounting for 32% of total revenue and 60% of all operating income.
But teasing that out of the new reporting format was nigh impossible. "There's no way to find out Windows or Office performance [using the new format]," said Singh.
Singh wasn't the first to contrast Microsoft's promise that the new format would be more transparent with the reality of number crunching. Last month, others, including Michael Cherry of Directions on Microsoft and Al Gillen of IDC, said the new financial reporting structure was opaque.
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