Microsoft Beats Expectations; Online Losses Up Again

Embattled CEO Steve Ballmer might* have some cause for cheer: Robust demand for PCs helped drive up sales of Microsoft’s software over the last three months, as the company reported its third consecutive quarter of increasing net income and revenue. The company said that sales jumped 22 percent to $16.04 billion, from $13.1 billion during the same period a year ago. Earnings per share came in at 51 cents per share, up from 36 cents per share a year ago. Both figures were solidly above analyst forecasts.

The company’s online services division — which encompasses Bing and MSN — posted a 13 percent increase in revenue to $565 million, driven by a 19 percent increase in online advertising revenue. But it continued to report big losses; losses jumped to $696 million, from $585 million a year ago, although they were down slightly from a quarter ago.

Microsoft’s entertainment and devices division reported a 27 increase in revenue to $1.6 billion, but that division posted an unexpected $172 million loss, which it said was due in part to charges related to the discontinuation of the KIN phone. Microsoft (NSDQ: MSFT) did not say how big those charges were.

Offsetting both losses was a blockbuster quarter for Microsoft’s Windows division, which reported a greater than expected 59 percent increase in operating income and 44 percent jump in sales due in part to strong sales of the Windows 7 operating system, which launched last fall. Microsoft’s business division, which includes Office, posted a bigger than expected 15 percent increase in sales, which the company attributed in part to a 51 percent increase in consumer revenue related to the recent release of Office 2010. Sales at Microsoft’s company’s server and tools division were up 14 percent and operating income was up 28 percent.

* The strong quarter comes as a new report from the Daily Beast suggests that some senior Microsoft executives want Ballmer out. Unfortunately for Ballmer, their beef is with Microsoft’s lackluster stock performance and not with the company’s revenue and sales numbers. And, although the company’s quarterly earnings beat expectations, the numbers apparently still weren’t enough to impress Wall Street. The stock is up less than one percent in after-hours trading.