Microsoft reports strong results despite PC dip

Microsoft has reported record third-quarter revenues of $16.43 billion and a 31 percent jump in profits to $5.

Microsoft has reported record third-quarter revenues of $16.43 billion and a 31 percent jump in profits to $5.23 billion despite a dip in revenues from the division that handles Windows PC sales and Windows Live. Revenues there fell to $4.45 billion compared with $4.65 billion in the same quarter last year, while the division's profits declined from $3.1 billion to $2.8 billion. However, booming sales of Microsoft Office and Xbox Kinect more than made up for it, and more than 5 million Kinect controllers were sold in the quarter. Windows Server sales also grew strongly despite competition from free Linux.

Microsoft's chief operating officer Kevin Turner said in a news release:

"We delivered strong third quarter revenue from our business customers, driven by outstanding performance from Windows Server, SQL database, SharePoint, Exchange, Lync and increasingly our cloud services. Office had another huge quarter, again exceeding everyone’s expectations, and the addition of Office 365 will make our cloud productivity solutions even more compelling. We continue to see strong adoption of our cloud-based services among the Fortune 500."

Microsoft is investing heavily in online services, and that division reported both higher revenues of $648 million and higher losses of $726 million.

Microsoft said "Office 2010 has become the fastest-selling version of Office in history," and that "Windows 7 remains the fastest selling operating system in history with 350 million licenses sold". In fact, sales in Microsoft Business Division grew by 21 percent to $5.25 billion, comfortably ahead of the Windows division's $4.45 billion.

The PC market has been affected by the recession and by sales of tablets, with some people buying Apple iPads instead of netbooks (see below). However, Intel's quarterly earnings, unveiled last week, showed 17 percent growth in revenues from its PC division, and 32 percent growth in its server/data centre sales. Increased sales of Intel chips should eventually lead to some increase in sales of Microsoft operating systems. At Forbes, Eric Savitz noted:

"Microsoft investor relations general manager Bill Koefoed said in a brief interview this afternoon that while the company’s Windows business saw a 9 percent rise in corporate PC units, consumer business units fell 8 percent, with netbooks in particular down 40 percent from a year ago. The overall PC market was down 2 percent, which is consistent to recent reports from IDC and Gartner. That is in sharp contrast, however, to the robust quarter reported by Intel; one big factor there is that Intel saw a boom in demand in emerging markets, where Windows is often pirated."

Microsoft ended the quarter with $50.2 billion in cash and equivalents, with around 80% of it held outside the US.

@jackschofield

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