Microsoft's record 3rd quarter revenue: Windows grows, Entertainment staggers

Microsoft logoMicrosoft has published its numbers for the third quarter of its 2012 financial year and the company reports record revenue for the period with double digit operating income growth. Revenue for the quarter was $17.41 billion, up 6 percent year over year. Operating income was up to $6.37 billion, a 12 percent rise on the prior period. Net income and earnings per share were both down, at $5.11 billion and $0.60, respectively.

In the second quarter, the Windows and Windows Live Division showed a drop in revenue, attributed to a slow PC market and hard disk shortages. The situation seems to have picked up. Third quarter revenue was up 4 percent year on year at $4.62 billion, with operating income growing 5.7 percent. The underlying PC market grew by between 2 and 4 percent. Business PCs grew by 8 percent and consumer PCs excluding netbooks grew by 6 percent. This was a much stronger performance than in the second quarter, in which business PCs grew by 2 percent and consumer ones fell by 6 percent.

Microsoft said volume licenses grew by double digits, and that 40 percent of enterprise desktops worldwide were now on Windows 7.

Microsoft Business Division revenue was up 9 percent year on year at $5.81 billion, and operating income up by 14 percent. Office 2010 continues to perform well, with Software Assurance revenue up 13 percent, transactional revenue up 5 percent. SharePoint and Exchange also experienced double digit growth, with Lync revenue growing by over 35 percent. The company's Dynamics range continues to steadily expand, with overall revenue growth of 11 percent, and a 30 percent increase for Dynamics CRM. The CRM product now has over 2.25 million users globally.

The Server and Tools division was up 14 percent year-on-year with revenue of $4.57 billion, and operating income up 29 percent. This growth was driven primarily by SQL Server, which had revenue growth in the high teens. The System Center range of products also had a good quarter, with revenue up more than 20 percent. Enterprise Services grew by 21 percent.

Online Services Division continues to struggle, but continues to head in the right direction. Its revenue was up 9 percent to $0.7 billion, and its operating loss was cut by 38 percent. Advertising revenue was up 9 percent. Bing showed a small quarter on quarter gain, now powering 15.3 percent of US searches, up from 15.1 percent last quarter.

The Entertainment and Devices Division was the only loser: revenue is down 16 percent year on year, at $1.62 billion. The group has gone from a $0.21 billion operating profit in third quarter 2011 to a $0.23 billion loss this quarter. Xbox 360 sales have declined sharply, down 48 percent year on year, though it retains its top spot in the US market, with a 42 percent share, and market-leading sales for the last 15 months. The company neglected to offer any Windows Phone sales figures.

In its guidance for next quarter, Microsoft said that it expects Windows division revenue to continue to be influenced by the overall PC market, with stronger performance in business markets than consumer, and emerging market growth outpacing developed market growth. For Business Division, Software Assurance licensing (about 60 percent of total revenue) will grow in the low double digits; transactional revenue (the remaining 40 percent) will lag changes in the PC market.

Server and Tools transactional revenue (30 percent) will track hardware sales. Multi-year license revenue (50 percent) and Enterprise Services (20 percent) are both expected to see growth in the high teens. Online services expects improvements and greater operating efficiencies, and the Entertainment Division expects revenue to grow in the low double digits.

Source: Ars Technica

Tags: Microsoft, report

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