PC not dead: Microsoft's results better than expected

Microsoft's latest quarterly results -- revenues up by 6 percent to $17.41 billion for the quarter ended March 30 -- have beaten Wall Street expectations, with one analyst, Josh Olson, telling Reuters: "Perhaps the demise of the PC is not as great as everyone is anticipating here.

Microsoft's latest quarterly results -- revenues up by 6 percent to $17.41 billion for the quarter ended March 30 -- have beaten Wall Street expectations, with one analyst, Josh Olson, telling Reuters: "Perhaps the demise of the PC is not as great as everyone is anticipating here."

The earnings release shows profits dipped slightly to $5.11 billion, but the year-earlier results had included a tax benefit worth $461 million. Operating income actually grew by 12 percent to $6.37 billion. In after-hours trading, Microsoft's shares jumped by 2.8 percent to $31.90.

The Server & Tools division was the star, growing revenues by 14 percent to $4.57 billion. (See table below.)

The Windows & Windows Live division did reasonably well, considering the weak PC market, with sales growing by 4 percent to $4.62 billion. Microsoft said business sales were stronger than consumer sales, and that Windows 7 was now on 40 percent of enterprise desktops.

The very profitable Business division, led by Microsoft Office, increased its sales by 9 percent to $5.81 billion.

However, the Entertainment & Devices Division (EDD) saw sales slump by 16 percent to $1.62 billion, and it reported a loss of $229 million compared to a $210 million profit last year. Microsoft blamed this reversal on a weak games console market, though the division also includes mobile phones.

Online services, which includes the Bing search engine, continued to be a disaster. Revenues grew by 6 percent to $707 million, and Microsoft made a loss of $479 million. However, this was a significant improvement on the $776 million loss it made in the same quarter last year.

Microsoft said it was continuing to strengthen its enterprise software offerings, and said strong sales of SQL Server 2012 contributed to results.

Microsoft has an "unprecedented refresh" coming this year, with new versions of Windows, Windows Server, Microsoft Office and many other products, which should increase sales. These refreshes may well be preceded by lacklustre quarters. In this case, Microsoft's slightly better-than-expected results have lightened the general air of gloom and doom.

@jackschofield

Note: For Josh Olson's full statement and other analyst comments, see Reuters' Instant View: Microsoft hitches ride on resilient PC market

 Microsoft Earnings table Q3

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