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Windows revenue takes another bad beating

Gregg Keizer | July 24, 2015
Microsoft on Tuesday said that Windows revenue again declined by double digits, the third straight such quarter, with sales of licenses to computer makers down 22 percent from the same period last year.

The biggest contributor to that money-making strategy in the June quarter was clearly Bing. In a filing with the U.S. Securities and Exchange Commission (SEC), Microsoft said that Bing search advertising revenue had increased 21 percent, or $160 million, in the second quarter compared to the same period the year prior. Adding Cortana, Microsoft's digital assistant and prognosticator, to Windows 10 was also part of the plan to increase Bing's importance to the OS -- which features strong links to the search engine in multiple components, including the new Edge browser -- and use Windows 10 to drive the search service's revenues.

While the growth in Bing ad revenue was less than a fourth of the decline in Windows revenue during the quarter, it was something.

Microsoft said nothing in the SEC filing about app revenue -- perhaps because it remains minuscule -- but it did boast of a $205 million increase, representing a 58 percent boost, from Xbox Live, its subscription-based multi-player network. Xbox Live is baked into Windows 10, and Microsoft has pinned significant revenue hope on the OS and Xbox Live reinvigorating the company's PC gaming business, with the monetization angle coming from the ties between the two platforms -- console and PC -- and sales of and on the former since the service will be free on PCs and tablets running Windows 10.

"Gaming is an important scenario for Windows 10, and our success with Xbox this quarter gives us a strong starting position heading into launch," said Nadella Tuesday.

And he remained glass-half-full. "We are confident that these are the right levers to revitalize Windows and restore growth," Nadella said.

In general, Microsoft's second quarter was a mess because of $8.4 billion in charges and layoffs in its phone division, resulting in the biggest-ever single-quarter loss and the first since 2012.

Microsoft took a $3.2 billion net loss for the quarter, compared to a $4.6 billion net profit for the second quarter of 2014, a $7.8 billion flip.


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