John Paczkowski

Recent Posts by John Paczkowski

Microsoft Earnings Come In on Target

microsoft_new_logoMicrosoft has a lot riding on the success of its new Windows 8 operating system and Surface tablet, so the company’s financials for the second-quarter — the first period to reflect the October launch of those products — are the first real indicator of how its so-called “re-imagining of Windows and … the whole PC industry” is working out.

Thankfully for Microsoft, it’s working out okay.

Posting financials after market close Thursday, the company reported fiscal second-quarter earnings of 76 cents a share, on $21.46 billion in revenue. Analysts, on average, had expected the company to report earnings of 75 cents a share on $21.6 billion in revenue.

So revenue roughly in line with consensus, and a beat on the bottom line by a penny. Not bad, considering what we’ve been hearing lately about Surface sales and the PC market.

Breaking Microsoft’s earnings down by division, there was good news and bad. The company’s Windows Division posted revenue of $5.88 billion, a 24 percent increase from the prior-year period. Its Server & Tools business reported $5.19 billion of revenue, a 9 percent increase year over year. Revenue at Microsoft’s Online Services division was also up at $869 million, an 11 percent increase from the year prior.

Revenue was down at both Microsoft’s Business and Entertainment and Devices divisions, though. The former posted $5.69 billion in revenue, down 10 percent year over year; the latter posted revenue of $3.77 billion, down 11 percent.

“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,” Microsoft CEO Steve Ballmer said in a statement.

That’s great. But we’ll have to take his word for it for the time being. Microsoft’s earnings release contains absolutely no mention of Surface sales and no details about how Windows Phone 8 is doing.

MSFT_Earns_Windows_Division

Notes from the earnings call …

  • Microsoft CFO Peter Klein says the number of apps in the Windows store has quadrupled.
  • Total revenue for Windows grew 11 percent during the quarter.
  • “We think of Surface as one part of the overall Windows story. … This quarter, it was a contributing factor for the revenue growth in the Windows business. It obviously had some limited distribution this quarter. Our goal is to continue to build out that business. We’re going to expand the product lineup and retail distribution and capacity.”
  • “We learned a lot about Windows 8 this quarter, a lot about the types of experiences and price points customers are looking for. We saw great demand for some of the touch devices, and in some cases we didn’t have the supply. I think we learned what we always suspected, there’s quite a bit of segmentation and differentiation.”

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work