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Microsoft’s Quarter Shrugs Off Falling PC Sales

Microsoft claims to be taking share in the hybrid cloud, data platform and virtualization

Microsoft shrugged off the precipitous downturn in PC sales and the diffident reception given Windows 8 Thursday when it posted record fiscal Q3 results.

It returned 72 cents a share, up 19%, on revenues of $20.49 billion, up 18%, beating expectations of 68 cents, but coming up light on the top line which Wall Street thought would be $20.53 billion or thereabouts.

In the same period last year Microsoft did 60 cents on $17.7 billion.

Earnings took a nine-cent-a-share hit because of the European Commission's latest $733 million fine.

The company also said that CFO Peter Klein will be leaving by the end of this quarter after four years in the job and 11 years at the company. Microsoft expects to find a replacement among its financial staff in the next few weeks. The company has lost a lot of familiar faces.

The Windows Division came in with revenues up 23% year-over-year to $5.7 billion. Excluding the Windows Upgrade Offer and other items, it would have had revenues of $4.62 billion, flat with last year. The unit now includes the company's reportedly poorly selling Surface Tablets, which have added the Surface Pro.

Revenues at Microsoft's Business Division, where Office lives, were $6.32 billion, up 8% year-over-year.

The Server & Tools unit reported $5.04 billion in revenue, up 11% year-over-year, attributed in part to double-digit revenue growth in SQL Server and System Center.

The Online Services Division reported revenue of $832 million, up 18% year-over-year with online advertising revenue up 22% driven by an increase in revenue per search.

The Entertainment and Devices Division returned revenues of $2.53 billion, up 56% year-over-year. Adjusting for the recognition of revenue related to the Video Game Deferral, the division's non-GAAP revenue increased 33%. Xbox Live now has over 46 million members worldwide, up 18% from this time last year.

Microsoft claims to be taking share in the hybrid cloud, data platform and virtualization.

CEO Steve Ballmer, whose continued suitability in the job is widely questioned, put out a statement saying, "The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox Live and Skype. While there is still work to do, we are optimistic that the bets we've made on Windows devices position us well for the long-term."

The stock was up 2.3% after-hours to $29.45.

By the way, rumor has it, according to Microsoft follower Mary Jo Foley, that Microsoft is going to change the off-putting look of its vaunted touchscreen-enabled Windows 8 - which is said to be contributing to the wretched state of PC sales.

The change agent, called Windows Blue, a k a Windows 8.1, is reportedly going to look more like the old Windows, letting users bypass the Metro-style Start menu and instead start their PCs in desktop mode.

Mary Jo, who's not 100% sure what will happen, also said that Microsoft may bring back the Start button as an option in Blue, which is supposed to be released to manufacturing in August.

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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