Microsoft posted strong quarterly numbers on sales of business software and Windows, but cloud and online services aren't yet major revenue drivers.
For its first
fiscal quarter of 2012, Microsoft reported strong sales of traditional software
such as Windows and Office. But its online services, which the company is
betting will eventually help supplant traditional software as a major revenue
driver, remain a relatively small part of the overall revenue scheme.
Microsoft reported revenue of $17.37 billion for the quarter ended Sept. 30, a
year-over-year increase of 7 percent. Operating income, net income, and diluted
earnings per share all rose. Several Microsoft divisions reported strong
revenue, including its Business Division, which experienced an 8 percent
increase from the year-ago quarter, to $5.62 billion. Server & Tools
segment revenue increased 10 percent year-over-year, to $4.25 billion.
During an Oct.
20 earnings call, Bill Koefoed, Microsoft's general manager of investor
relations, categorized the company as "thrilled" with the progress of Office
365, Microsoft's cloud-productivity platform, but declined to break out
specific subscriber numbers.
He alluded to
"monetization challenges" for aspects of Microsoft's Online Services division,
although overall revenue grew 19 percent. Quarterly losses for the division
totaled $494 million. Microsoft is depending on the data from its Bing search
engine to help inform and refine the rest of its cloud services.
share and managing expenses are the keys to eventually turning online services
toward profitability, Microsoft executives said during the earnings call.
Microsoft is working closely with Yahoo, with which it has a deep
search-and-advertising partnership, to make that happen.
Microsoft was built on sales of traditional software such as Windows, its
executives have lately embraced an "all-in" cloud strategy, centered largely on
subscription-based services to businesses large and small. Microsoft is also
pushing the cloud in the consumer realm, notably in products such as Windows
Phone, which is receiving a broad-based Mango update with some 500 new tweaks
Windows, Microsoft also reported Windows and Windows Live revenue of $4.87
billion, a 2 percent increase from the prior-year period. Last quarter,
softening PC sales had forced the division into a 1 percent decline. More than
450 million Windows 7 licenses have sold to date. Over the past few months,
Microsoft has offered several glimpses of the next version of Windows, code named
Windows 8, which will feature radical changes to its user interface.
estimated that the overall PC market grew between 1 percent and 3 percent
during the quarter, overcoming a weakness in netbook sales. "We have seen the
cannibalization of netbooks," he said, adding that Windows sales on traditional
notebooks had risen 14 percent.
recently completed its acquisition of Skype, forming the communications company
into a new division headed by former CEO Tony Bates. Skype software will
eventually find its way into a host of Microsoft products.
Nicholas Kolakowski on Twitter
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.