Microsoft's Q1 shines; Enterprise rolls along; Windows 8.1 wait and see

Microsoft's Q1 shines; Enterprise rolls along; Windows 8.1 wait and see

Summary: Overall, Microsoft's quarter fared well---especially considering the glum expectations going into the results. Enterprise and Xbox are firing. Windows 8.1 success remains to be seen at least for a quarter.

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Microsoft's first quarter was much better-than-expected as it sold Windows 8.1 into devices for the holiday season and benefited from continued strength in the enterprise.

The company reported first quarter earnings of $5.24 billion, or 62 cents a share, on revenue of $18.53 billion.

Wall Street was looking for first quarter earnings of 54 cents a share on revenue of $17.79 billion.

Overall, Microsoft's quarter fared well---especially considering the glum expectations going into the results. Steve Ballmer, outgoing CEO of Microsoft, said the company's new commercial services "will help us continue to outgrow the enterprise market." He added that there is consumer excitement for Xbox One, Surface and Windows 8.1 devices. The Xbox excitement isn't questioned, but the latter two categories are debatable for now.

On the consumer side, Windows revenue fell 7 percent, Surface revenue was $400 million and search ad sales surged 47 percent. Total device and consumer revenue was $7.46 billion, up 4 percent from a year ago.

Commercial sales were up 10 percent in the first quarter to $11.20 billion. SQL Server revenue and productivity tools also grew at a healthy clip. Microsoft said commercial cloud revenue was up 103 percent.

Here's a look at the new Microsoft reporting structure and the sales tally.

msft102413a

 You may also need a crib sheet on those new segments. Here's a look at what Microsoft lumps into those categories. 

5newsegments-620x358

Based on those new segments, the historicals highlight where the growth resides. For instance, commercial licensing is a bright spot and devices and consumer licensing is flattish at best. 

msft102413b

 

 

 

In its earnings presentation, Microsoft outlined a few other nuggets. The company outlined its inventory levels---a large issue given that Microsoft is becoming a hardware company too.

Microsoft said that its inventory surged 61 percent from a year ago due to the Surface launch as well as filling the channel with Xbox One ahead of a November launch.

msft inventory

 


The company also outlined the following:

  • Two-third of new Dynamics CRM customers are going cloud.
msft commercial

 

  • Bing is improving its revenue per search and Microsoft said it has more than 2 million Office 365 Home Premium subscribers.
msft bing slide

 

Topics: Enterprise Software, Microsoft, Windows

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57 comments
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  • just keep raising

    licensing revenue for 'commercial' PHBs and rake it in.
    GrabBoyd
    • Over the last 12 months...

      ...MS earnings appears to be proving wrong most of the tech bloggers predications . It appears the company is still far away from what was being told by those, who claimed to be an experts in writing about technology.

      Good news for Microsoft shareholders.
      Wonder.man
      • second to this

        I think you are expecting too much from the tech bloggers. They are by no means experts in business analysis and just post their opinions.
        pupkin_z
        • Oh come on SJVN is an expert in

          everything Microsoft. He blogs more about MS than he does Linux.
          ScanBack
        • second to that......

          it's funny how the bloggers are suddenly just writers of opinion pieces if they post a PRO MS blog, but any Apple or Google news is sucked up by the ABM masses as solid proof their tech religion is taking over the world.
          I've seen this time and time again over the years play out the same, with the same end results. The business world moves on with those who have historically been strong, staying strong and those who rise and fall on one or two products continuing to rise and fall. There are always many in the middle and they tend to float around in the middle.

          Now of course there are exceptions to all rules but in general I believe this to be the case.

          If there is a large move to the cloud, Microsoft is continually building Azure to be a front runner for it's existing enterprise customers. If you've been following it, they continue to add tools that are hard for enterprise users to not consider and that give customers a slow and easy path to the cloud. Google can't offer the on premises IT for the enterprise where the vast majority still feel the most comfortable not can they offer that slow transition where MS can. As this article points out, MSFT is being smart about integrating Azure into their products.

          http://www.itworld.com/cloud-computing/379679/microsoft-makes-it-harder-avoid-azure

          Bottom line is I believe MSFT will be as strong in the cloud as they currently are on premises but can continue delivering both
          xuniL_z
        • The tech bloggers are more like "advocates"

          As in "Apple is cool, no matter what they do wrong, they will always be cool so buy Apple no matter what the cost. Microsoft is stale and old, stay away from them. Windows 8 will never catch on (like we said about Windows 3.1 before it took over the world and Vista before a few tweaks made it Windows 7 that still owns the world). Linux is a pipe dream that we think is cool (because its based on Unix, which is the same base as Apple, so that's cool), but if you're going to go Unix go Apple. Did we mention Apple is cool?"

          There is very littler perspective. Image that everyone if ga-ga over iPads selling 170 million since gen 1 (its been 4 full generations), but fail to relate to the fact that Windows PCs are on pace to sell well over 350 million this year alone and have sold over a billion in the same time Apple sold 170 million.

          But then Microsoft is old and stale. Best to spend $1999 on a Macbook Pro than $500 of a laptop that is about 85% as good.

          Never settle for second best, when over priced awesome is available.
          A Gray
      • Yes, the whole "Microsoft will die" gang is out of their mind.

        This just shows the same fact we see over and over and over and over again. When the non-financial/business non-wizards around here make their ludicrous predictions about any of these big companies falling away into the great beyond, most of the time they don't have a clue and much of their prediction comes from personal distaste for what the company in question is up to, as opposed as to how the vast majority of the world actually is likely to respond to the companies efforts.

        Im not just talking about predictions negative towards MS either. Its almost always every bit as idiotic as any predictions made the same way about Intel, Apple, Google, Facebook or any of the huge IT companies that someone thinks should go broke.

        Look how hard it is to actually kill Blackberry. It hasn't been anywhere as huge as the others for quite some time, and to some degree never near as big in most cases, and Blackberry has taken one blow after another in the market place and is having a ridiculously hard time getting traction and it continues to be kicked hard when its down. And even still, its not quite dead.

        How hard do the brainless armchair financial analysts around here think it is to seriously hurt, never mind kill a real monster company like Microsoft or Apple or Intel? Its a business world feat so difficult that it makes David killing Goliath look like a relatively simple task.

        Its not just a simple matter of the hoards of money they have to back themselves up for an extraordinary amount of down time, which of course is very helpful if one of them really makes a lousy business decision of purely colossal proportions that would instantly crush a lesser company. Its also the fact that most of these huge IT companies would create a unsustainable massive void in the IT world if they were to disappear even over a few short years. Society inherently supports them simply due to the fact they are so ingrained into the fabric of our society that before they could loose enough over all sales to really cause them harm over a few years, they would practically have to start trying to sell self exploding suicide computers that killed most of their customers.

        Most predictions of doom and gloom to these ultra large IT companies are predicated in some ridiculous notion that not only has the company in question done something the article writer, or reader who posts a comment hates to death, but that the other 7 billion people in the world give half as much a damn about it as they do. Which is almost always notoriously incorrect as most of the writers and readers around here seem to have a very very poor notion of how most of the non tech savvy world thinks. You may car what OS runs your computer, most of the world for example fires up a Windows computer, it does the job great and they say good enough and just could not care less anything about whats under the hood. I know many today who still have no real grip at all about what an operating system even really is or why anyone would care.

        Secondly, many of the predictions rely on the idea that when a company makes a poor decision, as in a decision that hasn't been particularly profitable, that the company in question will never ever make a successful effort to improve things and that no particularly profitable decisions may be in the offing not too far down the road. In shot, if it appears the plug may have been pulled in the bottom of the boat, nobody is ever going to bail and nobody will ever try and get the plug back in and they will all just sit around watching the queen Mary sink one gallon at a time for years until its gone.

        Bottom line is, many around here just need to get a grip and stop predicting the end of the world until there are solid facts that indicate it really is true and not just a fanciful wish.
        Cayble
      • This is the reason...

        http://www.zdnet.com/microsofts-client-access-licensing-and-pricing-changes-to-hit-december-1-7000007916/

        http://www.zdnet.com/microsoft-ups-price-on-windows-server-2012-r2-datacenter-by-28-percent-7000019168/

        Just keep jacking those prices. Corporations can't rip and replace over night, they have to pay.

        This can only work in Microsoft's favor for so long.
        paebin2s
        • There is lots more to come

          The biggest piece of news in the whole announcement is this one: "search ad sales surged 47 percent." It won't take too many quarters of this kind of growth for this division to finally become profitable. MS has a habbit of hanging onto things, grinding away, until they work.

          If they show the same determination with the windows 8 ecosystem (which includes both phone and desktop) mark my words, there will be growth there, too. Windows 8.1 is just out, and finally makes Windows 8 a worthy OS. The hardware that MS' partners are coming up with is varied and often amazing.

          I think the future is rosy for MS. There is room for continued success for many big IT companies.
          x I'm tc
        • No company is going to be paying MS if there isn't great value

          to that company that increases their bottom line.

          If a company can't make ends meet because it's spending too much on MS products and services, then they'll either look elsewhere for equal or better value, or they'll try to downsize the company or cut staff or cut salaries, or just go out of business. Fact is that, any business that can't pay for necessary services and equipment, probably can't be in business to begin with.

          Microsoft doesn't force a business to use MS products or services. There is still competition out there for most of what MS produces, but sometimes, those other options are as expensive or more, or cannot produce the same desired results, or don't get the same support as a large company as MS.

          If you want the best, you sometimes have to pay more; but, in MS's case, their prices are quite reasonable and often less than the competition.
          adornoe
      • Enterprise by the Balls

        You bet your company on Microsoft you have few options to get out.

        So they raise rates cause you are not going to go anywhere. Where you gonna go when they raise your rates? Sure you can migrate out but it's expensive, time consuming, and mostly not worth it.

        Although when the systems need to be replaced smart companies look at all the options.

        What I saw was enterprise was up but everything else was down.

        So BOHICA (Bend Over Here It Comes Again) Enterprise, cause next time MS won't use lube.
        itguy10
      • to be fair

        Most tec bloggers lament MS's consumer offerings and it appears they're not improving on that front. Enterprise always got a thumbs up from most tech bloggers.
        ArcaneAce
    • Right, b/c their products are worth it

      What da ya gonna do other than whining?
      LBiege
    • ROTFLMAO!

      Look at the poor little Microsoft-hating twat try to spin.
      jhammackHTH
    • Exactly.

      In November of 2012 15% hike across the board for software CAL's (Windows, Office, Exchange, Lync ...etc)

      This fall data center products are increasing 28-40%. Windows Server Data Center licensing is going from $2100 to over $6000.

      Losing market share but making up for it with big price hikes. That can only last so long.

      I also hear from our CDW rep that audits are way up as well.
      paebin2s
      • Get out of MS

        Start small and convert to non Microsoft solutions.

        Get out of the POS called Lync/Exchange!
        Migrate off SQL Server!
        File servers Linux and Samba!
        Etc, etc.
        itguy10
        • You lost me at Lync/Exchange

          C'mon, man, those are the gold standard and you know it. Nothing. Else. Comes. Close.

          If you'd said Sharepoint, you might have gotten an amen.
          x I'm tc
  • they may be loathe to pay income tax

    but they sure will pay m$ tax.
    GrabBoyd
  • Excellent quarter

    Kudos MS. Shareholders are more than happy.
    Owl`Net
  • Windows 8.1, the Upgrade that never needed to happen!

    I installed 8.1 and found it altered functionality of the Start Screen and reverted back to Windows 8.

    Everybody complained you couldn't boot to the desktop but, if you shut the machine down while in the Desktop, Windows 8 remembered it and it started right up on the desktop.

    People complained because the Start Button was hidden and the Start Menu was gone! So, the start button is in the same place it was in Windows 8 but, now it is always visible... However, it hasn't fixed the lack of the Windows 7 start menu.

    Then they complained about the Start Screen! The start screen is actually just a favorites screen and the fact that they took the All Apps Icon and converted it to a Down Arrow (which could mean get rid of the bar at the bottom) was just as stupid.

    Windows 8 was different but, it was uniform and everybody I know that actually spent time and learned it, loved it! Windows 8.1 broke some of that uniform nature and honestly, even for free it is an OS I'm going to avoid.
    slickjim