Today Microsoft shared with the financial world how their second quarter, which ended on 31 December 2011, went and showed that it had mixed results.
There is more information on the specific earnings at the Microsoft News Center – Microsoft Reports Record Revenue of $20.9 Billion in Second Quarter.
I want to just talk about a couple of the numbers they shared concerning their Online Services Division and the Windows/Windows Live Division.
The big headline being written by everyone today is that Windows revenue was down and in fact Microsoft reported that the Windows/Windows Live Division saw a 6% decline. Microsoft blamed a slow PC market but I also think there may have been some slow down in the adoption of Windows 7 because of the approach of Windows 8. Windows 8 has been getting a lot of discussion since it was revealed last September during the Microsoft Build Conference. With over 3 million downloads of the Windows 8 Developer Preview confirmed during CES 2012 there is a lot of enthusiasm about the next version of Windows. That may just be enough to slow down any further uptake while waiting on Windows 8 release later this year. That beta is expected in late February. They did state that there have been more than 525 million licenses sold for Windows 7.
The other number I want to mention is the Online Services Division which saw a 10% increase in revenue and that was likely buoyed by increases seen by Bing in the search engine arena. The online services area has been eating cash for quite a while now but it is an area Microsoft is not going to get out of anytime soon. What company in their right mind would drop the Internet anyway? It does show they will stick with something despite its financial challenges and market share shortfalls.
I think those reasons also point towards their remaining in the Windows Phone business as well. As mentioned in the earning reports they just got some great exposure during CES with Windows Phone handsets being named Best in Show and the latest handsets getting rave reviews as well.
It should be no surprise that the Entertainment and Devices division did well – they are the Xbox folks – with the Xbox 360 console sales leading every month of 2011. That was also a division that was not doing so well that Microsoft stuck with and now it earns almost as much as their Server & Tools/Business Divisions. They reported that there are 66 million Xbox 360’s out there with 18 million Kinect sensors and that Xbox live has 40 million members world wide. With the recent update to the Xbox 360 dashboard the console is becoming even more of an entertainment device and not just a gaming console.