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Microsoft gets a (little) boost from Windows 8, but profits fall

For its second quarter, Microsoft’s closely watched Windows division posted revenue of $5.88 billion, up 11 percent compared to the year-ago period when deferrals are factored in. Microsoft typically defers a portion of revenue in quarters when it has big Windows or Office product launches to cover upgraders who may have paid for but not installed the upgrade. Without deferrals, the Windows business would have been up 24 percent compared to $4.74 billion in revenue last year.

Steve BallmerOn the company’s earnings call, CFO Peter Klein said Microsoft had moved 60 million licenses of Windows 8 — an impressive number by any standard. But it would not talk about sales of its new Surface tablet devices. Microsoft will recognize $1.1 billion of deferred Windows-related revenue at the end of February when the deadline for discounted upgrades ends.

Microsoft(s msft) launched the much-hyped Windows 8 on October 26 but the sales of Windows-based PCs, did not get a big boost.  At least at retail,  sales actually fell 11 percent in the holiday buying season compared to last year, according to the NPD Group.

To say that Microsoft CEO Steve Ballmer is on the hot seat would be an understatement, given the drubbing the company has taken for “missing” the smart phone and tablet revolution that Apple(s aapl) capitalized on. The company is banking that its latest edition of Windows and its Surface tablet which also debuted this fall, will make it more competitive in both arenas.

Overall Microsoft for its December quarter, logged $21.5 billion  in  revenue or 76 cents per share, compared to $20.89 billion or 78 cents per share for the same period last year. But profit fell 3 percent to $6.4 billion from $6.7 billion the year before.  Analysts surveyed by FactSet expected the company to come in at 75 cents earnings per share on $21.6 billion revenue for the quarter, according to Marketwatch.

Microsoft’s earnings release is here.

This story was updated at 3:50 p.m. PDT with additional detail from the earnings call.

3 Responses to “Microsoft gets a (little) boost from Windows 8, but profits fall”

  1. Rann Xeroxx

    IMO, MS is on the right track and basically is doing what they HAVE to do. Windows 8 and Surface do not have to be completely successful for them to be a success if they allow the company to bridge the gap from PC to mobile. How would I make Windows 8 better?…

    * Put full Office (including Outlook) on the Surface RT/Pro and don’t force businesses to buy a license. You need to get these devices in the hands of business and entrench them there. Right now they are buying iPads and just like education, you could loose that market.
    * Give people a start button if they want it. You can leave it off by default but give them the option to turn it on. If you are using W8 on a laptop or desktop, there really is little reason to use a touch screen.
    * Turn all MS installed applications into W8 apps and allow them to be “Windowized”. If people are installing legacy applications then they should expect an less immersive experience with the UI but the OS itself should not be bumping back and forth between UIs.

    Just my thoughts.

  2. Yes, because compare to Windows 7, Win 8 missed lot of features that necessary for a regular user. Some like…
    Windows 8 didn’t support 32bit(hardware compatibility issue)
    Win 8 Support only IE10, not 9,8,7
    Didn’t support Office 2003

    Needs for few up-gradation in Windows 8 software pack.

  3. “The company is banking that its latest edition of Windows and its Surface tablet will make it more competitive.”

    I’ll send Ballmer a whole box full of 4-leaf clovers. Maybe that’ll help.