Microsoft reported revenue buoyed by strong sales of Office 2010 and Xbox Kinect, although softness in the PC market affected sales of Windows.
quarterly earnings rose on solid sales of Office 2010 and the Xbox Kinect
hands-free controller, despite some reported softness
in PC sales during the period.
third-quarter revenue hit $16.43 billion, a year-over-year increase of 13
percent. Net income rose 31 percent, to $5.23 billion. Revenue for the
company's Business Division, which produces Office 2010, rose 21 percent
year-over-year, while the Entertainment & Devices Division, responsible for
the Xbox 360 and Kinect, reported a 60 percent year-over-year rise.
Tools revenue rose 11 percent year-over-year, and Online Services Division
revenue marked a 14 percent rise, driven by increases in search revenue.
However, Bill Koefoed, Microsoft's general manager of investor relations,
cautioned on the April 28 earnings call that "expected monetization" of the
Yahoo search-and-advertising agreement is "taking longer than expected" and
that "international integration efforts" had been delayed as a result. Under
the terms of that agreement, Microsoft's Bing powers Yahoo's backend search,
while Yahoo takes over a substantial portion of the two companies' advertising
sales force duties.
7 having sold 350 million licenses since its October 2009 launch, Microsoft's
Windows segment reported a 4 percent dip, something Microsoft explained in a
statement ahead of the earnings call as "in line with the PC trends."
According to a
recent IDC report, a "cautious business mentality and waning consumer
enthusiasm" combined with "a spike in fuel and commodity prices and disruptions
in Japan" caused a 3.2 percent contraction in global PC shipments during the
first quarter of 2011. Given the sheer number of those machines running
Windows, it stands to reason the operating system would take a hit alongside
said, Microsoft chief financial officer Peter Klein suggested to media and
analysts listening to the earnings call that enterprise deployments of Windows
7 had more than doubled "over the past six months." Sales of business PCs also
apparently remained strong, but Microsoft's own numbers apparently place the PC
market's quarterly decline at between 1 and 3 percent.
traditional product lines, including Office and Windows, continue to drive the
lion's share of overall revenue, the company's "all in" focus on cloud
computing inevitably draws attention to the profitability of new and upcoming
projects such as the cloud-based Office 365. There are also persistent
questions about Microsoft's performance in the smartphone arena, where its
Windows Phone 7 line of devices hopes to carve out some market-share from
Google Android, Apple's iOS and RIM's BlackBerry franchise. In the latter case,
Nokia's recent embrace of Windows Phone 7 for its upcoming smartphones is
widely seen as a move that could potentially alter the mobile market in
Microsoft's favor, although the extent of such benefits remains unclear.
On the earnings
call, Microsoft offered no additional information about Windows Phone 7's
actual sales to consumers.
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.