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

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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 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 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.

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