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Microsoft Still the Money Machine It’s Always Been

The December quarter was the first to include the newfangled Windows 8 and ARM-based RT Surface tablet sales

Despite all the happy post-PC talk and the 4.9% drop in worldwide PC shipments last quarter, Windows is alive and well.

Microsoft posted the numbers from its December quarter Thursday and revenues from its Windows Division were up 24% to $5.88 billion year-over-year while Windows profits were up 14%.

Non-OEM revenue grew 40% driven by sales of Surface tablets and Windows upgrades.

Microsoft previously said it had licensed more than 60 million copies of Windows 8, a trajectory equal to Windows 7, which came out in 2009 and now account for more than 60% of enterprise desktops by Redmond count.

Microsoft's Server & Tools business, where its clouds are, was up 9.5% to $5.19 billion with profits up 8.8%, and Online Services, which houses Bing and has a history of losing money, was up 11% to $869 million.

The Office unit, however, including the cloud version of Office, was down 9.8% to $5.69 billion in revenue with profits off 15% - maybe because a new version of Office is coming - and revenues from the Xbox unit dropped 11% to $3.77 billion although its profits were up 15%.

Altogether Microsoft saw record total revenues of $21.46 billion, up 2.7%.

The number includes $1.3 billion in deferred revenue.

Microsoft made $6.4 billion, or 76 cents a share, in the quarter, down 3.7% compared to the $6.62 billion, or 78 cents a share, it wracked up this time last year.

Excluding the impact of deferred revenue and revenue recognized for Windows 8 pre-sales, adjusted earnings were 81 cents a share.

Operating expenses rose 10%.

The December quarter was the first to include the newfangled Windows 8 and ARM-based RT Surface tablet sales. Both products only came out in late October and have been written off as slow starters.

CFO Peter Klein said on the conference call that Surface "was a contributing factor for the revenue growth in the Windows business" despite limited distribution and limited supplies, the latter the same problem Apple had. Klein said, "We're going to expand geographically, we're going to expand the product line-up and retail distribution and capacity."

The Surface Pro, which Microsoft hopes will attract the enterprise as a replacement for PC laptops since it can run traditional Windows apps, comes out February 9. It comes with a keyboard and should run $899, a price that might put it out of reach of the average consumer.

Microsoft said "multi-year licensing revenue grew double-digits across Windows, Server & Tools and the Microsoft Business Division" or Office unit. That translates into unearned revenue, a measure of future sales, of $19.8 billion, better than Wall Street expected. A lot of it was evidently commitments to SQL Server along with SharePoint and Excel for business intelligence.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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