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Microsoft revenue up, aided by Windows unit sales, though profit declines

Juan Carlos Perez | Jan. 25, 2013
The results are the first to include Windows 8.

Though Microsoft's second-fiscal-quarter profit declined, company revenue increased, helped by its Windows division, where sales shot up more than 20 percent year on year.

Microsoft revenue increased 2.7 percent to US$21.46 billion in the quarter ended Dec. 31, 2012.

Net income shrunk to $6.38 billion, or $0.76 per share, from $6.62 billion, or $0.78 per share, in 2012's second fiscal quarter, the company said on Thursday.

Microsoft CEO Steve Ballmer said in a statement that the company's "big, bold ambition to reimagine Windows," along with other initiatives like its Surface tablet device and the new Windows Phone 8 OS, are paying off with customers, partners and developers.

The Windows Division generated revenue of $5.88 billion, up 24 percent year on year. However, on a pro forma basis, revenue was up 11 percent to $5.26 billion when factoring in a net deferral of revenue for the Windows Upgrade Offer and the recognition of previously deferred revenue from Windows 8 pre-sales.

The Server & Tools business, which includes products like SQL Server and System Center, posted revenue growth of 9 percent to $5.19 billion.

The Business Division, which includes the Office suite, had $5.69 billion in revenue, down 10 percent. But when adjusted for the impact of the Office Upgrade Offer and pre-sales, pro-forma revenue rose 3 percent. Revenue from server software including Lync, SharePoint and Exchange hit "double-digit percentage growth." Microsoft is expected to ship a new version of the Office suite this quarter.

The Entertainment and Devices Division, which includes the Xbox products, saw revenue decline 11 percent to $3.77 billion.

The Online Services Division, which includes online advertising generated by Web properties like the Bing search engine, increased its revenue 11 percent to $869 million.

Overall, Microsoft said that its pro-forma revenue was $22 billion, when adjusted in part to reflect revenue deferrals for several Windows, Office and video game offers, as well as pre-sales.

Windows 8 sports a radically redesigned user interface based on tile icons that is optimized for touchscreens found primarily in tablets but also in newer "hybrid" laptops and some desktop PCs, like all-in-one systems.

The new OS started shipping in October, and Microsoft has said it is satisfied with the product's sales, a message that is at odds with skeptical views from market researchers like NPD Group and IDC, as well as financial analysts from Morgan Stanley.

In November and again in January, Microsoft said that Windows 8 shipments were "roughly" in line with Windows 7 shipments at the same stage of the sales cycle three years prior.

However, NPD Group declared in late November that Windows 8 had failed to give the consumer Windows PC and tablet market enough of a boost, and that in the first four weeks after its launch Windows device sales fell 21 percent year on year.


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