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Microsoft Skips Over Mobile And Talks Xbox Live Instead

One word that wasn’t mentioned much — if at all — during Microsoft’s earnings call Thursday: mobile. Instead, while discussing the performance of the company’s entertainment and devices division, which encompasses Windows Phone and Xbox, executives chose to focus in on a much rosier business — Xbox Live. CFO Peter Klein noted that the company is now generating as much in cash from Xbox Live’s digital marketplace — which includes games, music and video downloads — as from Xbox Live subscriptions. Klein said it was a sign of “increasing customer engagement and monetization” of the service.

In its earnings report, Microsoft (NSDQ: MSFT) also called out Xbox Live growth as helping to drive a 27 percent increase in revenue at E&D. The growth, however, wasn’t enough to drive the division to a profit. Indeed, in explaining why operating losses at the unit had increased to $172 million from $141 million during the same period a year earlier, the company cited “increased royalty costs resulting from increased Xbox Live digital marketplace third-party content sales,” along with charges related to the discontinuation of its KIN phone.

Some other highlights from the call:

Klein was asked whether Microsoft’s expectations for double-digit plus growth in the PC market included tablets. He said it did not and that the company believes growth from tablets will be “additive.” “Tablets are very interesting and remind us there are new scenarios and opportunities,” he said.

As for the company’s online division, Klein said the company was “encouraged by the pace of Bing’s share gains.” He said the company’s search business was outperforming the market and expected it would continue to do so.

In terms of greater trends, Klein — who sounded bullish throughout the call, as one analyst remarked — said the company had not seen any slow down in sales towards the end of the quarter.