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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.

Later in early January, NPD Group said that Windows 8 "did little to boost holiday sales or improve the year-long Windows notebook sales decline."

About a week later, Morgan Stanley financial analysts downgraded the firm's recommendation on Microsoft's stock from Overweight -- the equivalent of "buy" -- to Equal Weight, the equivalent of "hold," citing concerns over Windows 8 sales and over the PC market dynamics.

Meanwhile, IDC reported that worldwide PC shipments fell 6.4 percent to 89.8 million units in the fourth quarter of 2012, year on year, a steeper decline than the 4.4 percent IDC had anticipated. A big part of the problem was that Windows 8 failed to jump-start sales, IDC said.

Even while expressing satisfaction with Windows 8 sales, Tami Reller, CFO and chief marketing officer of the Windows Division, acknowledged in January that OEM partners hadn't made enough Windows 8 touch devices to meet the high demand for that type of computer.

"Frankly, the supply was too short," she said then at an event held at the CES show in Las Vegas where she answered questions from a JP Morgan analyst.

"There was some misalignment between where products were distributed and where the demand was," she added.

Some tablets running Windows RT -- the Windows 8 version for ARM chips -- didn't get the type of distribution "that would have been ideal," she said.

Microsoft is counting on Windows 8 to help improve the operating system's minuscule share in the white-hot tablet OS market, where it lags significantly behind iOS and Android. Meanwhile, the PC market, where Windows has historically been the dominant OS, is shrinking.

Last year, Gartner forecast that worldwide media tablet sales to end users would total 119 million units in 2012, up 98 percent compared with 2011, and that Apple's iOS would continue its dominance with a projected share of over 61 percent. Windows tablet shipments were expected to be only 4.8 million in 2012.

Microsoft has been offering Windows 8 Pro upgrades at discounted prices as low as $14.99, but prices will shoot up after Jan. 31 to $199.99.

One special offer lets people upgrade an existing Windows XP, Windows Vista or Windows 7 PC and lets them acquire Windows 8 Pro for $39.99 via Windows.com download or $69.99 from a retail store DVD. The other offer, priced at $14.99, is for consumers upgrading a new Windows 7 PC bought between June 2 of last year and Jan. 31 -- they have until Feb. 28 to register for the special upgrade price.

After Jan. 31, people will also be able to upgrade for the first time to the regular version of Windows 8 for $119.99.

Windows 8 Pro is more advanced than Windows 8 in areas like security, networking, virtualization and remote desktop access.

 

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