Windows 8 Lifts Revenue in Microsoft's Second Quarter

Microsoft's Windows Division, boosted by Windows 8 sales, posted a 24 percent gain in revenues. However, silence on the number Surface RT units sold and Windows 7's continued popularity signal challenges ahead.

Microsoft today credited brisk business demand and pivotal product launches, like Windows 8 and the company's Surface tablet, for helping to drive record revenue during the company's second quarter.

The company posted revenue of $22 billion (non-GAAP) for the quarter ended Dec. 31, 2012, a 5 percent increase compared with the same quarter during the prior year. The total includes deferred revenue from offers and presales related to Windows and Office upgrades. On a GAAP basis, the company reported revenue of $21.5 billion.

During a Jan. 24 earnings call for investors, Peter Klein, Microsoft's chief financial officer, had little to add to the estimate of Windows 8 sales that Tami Reller, chief marketing officer and chief financial officer for Windows, shared in early January at CES. During the J.P. Morgan Tech Forum at CES, she revealed that the company had sold 60 million Windows 8 licenses, a figure that compares favorably to early Windows 7 sales.

On the call, Klein sang the same tune. "To date, we have sold over 60 million licenses of Windows 8," he said.

Microsoft did not release Surface RT sales figures, saying only that the tablet contributed to revenue growth. Analysts widely agree that sales of Microsoft's tablet are underwhelming. It's a situation that the company hopes to reverse with the upcoming release of its Windows 8 Surface Pro slate.

In total, Microsoft's Windows division generated $5.88 billion in revenue (GAAP), a 24 percent rise over the same prior year period. Excluding revenue from the Windows Upgrade Offer and presales, the figure dips to $5.259 billion, or an 11 percent increase.

"Non-OEM revenue grew over 40 percent, driven by Windows 8 upgrades, sales of Surface and double-digit growth in volume licensing," said Chris Suh, general manager of Microsoft Investor Relations.

In a statement, Microsoft CEO Steve Ballmer said that the company's recent big launches have re-energized the Windows brand. "Our big, bold ambition to reimagine Windows as well as launch Surface and Windows Phone 8 has sparked growing enthusiasm with our customers and unprecedented opportunity and creativity with our partners and developers," said Ballmer.

"With new Windows devices, including Surface Pro, and the new Office on the horizon, we'll continue to drive excitement for the Windows ecosystem and deliver our software through devices and services people love and businesses need," added Ballmer.

The software giant will need to work to build and maintain Windows 8 momentum or risk embarking on a long climb out from under Windows 7's shadow.

During the earnings call, Klein highlighted the enduring popularity of Microsoft's last-generation operating system, particularly among businesses. "Windows 7 momentum in the enterprise continues and today, over 60 percent of enterprise desktops worldwide are on Windows 7," he said.

So far, Microsoft's big gamble is starting to pay off, according to the company. Klein boasted that since the Windows 8 launch in late October, "the number of Windows 8 certified systems has nearly doubled, the number of apps in the Windows store has quadrupled and Windows users have downloaded over 100 million apps."

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...