Microsoft's second quarter Kinects

Microsoft's second quarter Kinects

Summary: Microsoft reported much better-than-expected fiscal second quarter results as it sold 8 million Kinect Xbox sensors and rode demand for Office 2010.

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Microsoft reported much better-than-expected fiscal second quarter results as it sold 8 million Kinect Xbox sensors and rode demand for Office 2010.

The software giant reported second quarter earnings of $6.63 billion, or 77 cents a share, on revenue $19.95 billion, up 5 percent from a year ago. Wall Street was expecting 68 cents a share on revenue of $19.15 billion. The release was issued a bit before market close.

As for the outlook, Microsoft reaffirmed its expense guidance for fiscal 2011. Here's a look at Microsoft's assumptions for the third quarter and fiscal year.

It's an odd quarter for Microsoft as the best storylines aren't focused on Microsoft's bread-and-butter franchises---Windows and Office. This quarter was really more about the budding businesses Microsoft is hoping can diversify the company.

Here's how the upstart businesses did during Microsoft's quarter:

  • The entertainment and device division delivered second quarter operating profit of $679 million on revenue on $3.7 billion. For context, that same division reported operating income of $365 million on revenue of $2.4 billion. That's boost---and Microsoft's better-than-expected quarter---boils down to Kinect. "The 8 million units of Kinect sensors sold in just 60 days far exceeded our expectations,” said Peter Klein, chief financial officer at Microsoft.

  • Microsoft's Online Services Division, think Bing, saw a revenue pop, but just lost more money than a year ago. Microsoft's Internet unit reported a loss of $543 million on revenue of $691 million, up from $579 million a year ago.
  • According to the company, developers are adding 100 apps to the Windows Phone 7 marketplace a day. However, Microsoft's Windows Phone 7 sellthrough remains a bit of a mystery. Earlier on Thursday, AT&T gave Windows Phone 7 a passing mention, but that's it.

With that tour of Microsoft's future out of the way, the stalwart Windows and Office units delivered most of the gains for the quarter. Microsoft's Business Division, also known as Office and SharePoint, delivered operating income of $3.96 billion on revenue of $6.03 billion, up 24 percent from a year ago. The Windows and Windows Live unit delivered operating income of $3.25 billion on revenue of $5.05 billion. Simply put, Microsoft's cash cows are doing just fine.

And Microsoft's servers and tools business also did well with second quarter operating income of $1.77 billion on revenue of $4.39 billion.

Topics: Enterprise Software, Banking, Microsoft, Operating Systems, Software, Windows

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  • RE: Microsoft's second quarter Kinects

    DonnieBoy had to go change his pants before he posts.
    Mythos7
    • RE: Microsoft's second quarter Kinects

      @Mythos7 :) He had to change his pants when the news of Google stealing the Android code was posted !!!
      1773
      • Wasn't that a mistake?

        @MSPawar

        Either way, people replacing their computers with iPads, and the death of x86/64, Windows, and Office seem over exaggerated now. He'll have to come up with new lines. ;)
        The one and only, Cylon Centurion
      • RE: Microsoft's second quarter Kinects

        @MSPawar <br>Don't forget about his comments on Office is only formatting text, Win32 and WinTards. <img border="0" src="http://www.cnet.com/i/mb/emoticons/wink.gif" alt="wink">
        Ram U
    • RE: Microsoft's second quarter Kinects

      @Mythos7 Hahahaha :-)
      statuskwo5
    • RE: Microsoft's second quarter Kinects

      @Mythos7

      [i]"DonnieBoy had to go change his pants before he posts."[/i]

      I think his mommy still does that for him.
      bobiroc
    • RE: Microsoft's second quarter Kinects

      @Mythos7 Change for what? Kinect is $199...it's an add-on to the XBox 360. Microsoft should be tooting that it beat PS3 and Nintendo, not Apple. So now Microsoft is counting sales for video games as a comparison to production equipment?

      Hey, I heard Toyota sold millions of Camrys this year, take that Dyson Vacuum Cleaners!!!
      Ron Burgundy
      • thats right cyberbrother!!

        @Ron Burgundy
        some people don't get it - M$ should be comparing windblows 7 sales to osx, but they wont because osx outsold windblows 7!!
        Ron Bergundy
      • Correction

        @Ron Burgundy Kinect is actually $149 not $199.
        statuskwo5
      • RE: Microsoft's second quarter Kinects

        @StatusKwo5 Thanks, typo LOL....
        Ron Burgundy
      • RE: Microsoft's second quarter Kinects

        @Ron Burgundy

        While I agree a comparison to the PlayStation Move would be a more direct comparison I think the point was that the iPad is a much talked about Apple gadget that gets praised for it's sales numbers and the Kinect is a Microsoft Gadget that also shows it sells well.
        bobiroc
      • RE: Microsoft's second quarter Kinects

        @Ron Bergundy (the imitator)

        [i]"some people don't get it - M$ should be comparing windblows 7 sales to osx, but they wont because osx outsold windblows 7!!"[/i]

        So are you admitting that all the 10.x versions of OS X are the same OS and should be treated as such? I ask because I have been told over and over that every .x installment of OS X is a completely new version. I just want to be clear because if you are going to lump all 6 versions of OS X that came out with just 1 version of Windows then how is that a fair comparison. You would have to Include all the sales of Windows 2000 through Windows 7 to compare it fairly. Or is that trolls like you do not like fair comparisons?
        bobiroc
      • RE: Microsoft's second quarter Kinects

        @bobiroc

        Wrong ron.
        Ron Burgundy
      • RE: Microsoft's second quarter Kinects

        @bobiroc
        OS X 10.6 to OS X 10.5 is akin to Windows 7 to Vista. I know, there's that decimal point thing. Relax. Take a breath, repeat, "It's only nomenclature, it's only nomenclature." (Besides, Vista is technically Win 6.0 and Win 7 is technically Win 6.1.)

        Compare Windows 7 sales to OS X sales? That's easy. Oodles to a very few. Except for personal computer upgrades, Apple doesn't sell its operating system.

        Let's all put our heads on straight for at least a moment. In the gaming sector, Microsoft has chosen to sell devices. It took them a while to turn the corner on their XBox, but it looks they have. The Kinect is an out-of-the-box big hit. Excellent. It shows what Microsoft can do when a division doesn't have to protect the operating system or Office products.
        DannyO_0x98
  • More Kinects sold then iPads

    Tell me why Apple gets praise for selling 7 million iPads and Microsoft sold 8 million Kinects? Plus 300 million Windows licenses.
    jscott418-22447200638980614791982928182376
    • RE: Microsoft's second quarter Kinects

      @jscott418 <br>Because so called Wall Street Gurus and media don't get money if they praise Microsoft. They feel heck a lot if they comment negative about Microsoft. Remember these wallstreet gurus lied to us, Americans, many times and doomed the country economy to just fill their pockets. Whether it is Apple or Microsoft they don't care. Remember about iPhone 4 fiasco here. They made it heck of issue out of it. The same they do for anything as long as they could spread mud and can lie about. Now what would Goldman and Gartner say about it. They said Microsoft couldn't sell Kinects and Windows Phone 7. Both are proven flat, what would be their next lie?
      Ram U
    • Because of the profit margins.

      @jscott418 those 7 million iPads likely added more revenue to Apple then the profits of Kinects did for Microsoft, though I can not offer what the actual ROI was.

      It would be logical to assume that Apple spent a great deal more money developing the iPad than Microsoft did developing the Kinect.
      :|
      Tim Cook
      • RE: Microsoft's second quarter Kinects

        @Mister Spock

        Ah, but I think its logically flawed to compare the R&D spend only from specificially the success stories. R&D inevitably has its misses too, leading to little or no future revenue. In fact MSFT spends something like twice APPL on R&D (about 10Bn to 5Bn).

        Any analysis of these figures probably should also consider their respective marketing budgets - guess who spends the most there?
        njoho
      • thats right njoho!!

        @Mister Spock doesn't understand that even though M$ has ALOT more products then apple (so hence the bigger r&d budget) that you have to sell millions to recoupe your costs.

        what else does M$ have that sells a million units or more?
        Ron Bergundy
      • RE: Microsoft's second quarter Kinects

        @Mister Spock

        Why do you assume more went into development of the iPad than the Kinect? The Kinect (IMO) is a MUCH more revolutionary product that has more potential than the iPad which is an iPhone on a larger screen basically.
        omdguy