Two Microsoft Q1 FY2014 charts you'll want to see

Two Microsoft Q1 FY2014 charts you'll want to see

Summary: The soft spots in Microsoft's first quarter of its fiscal 2014 are more apparent when using the old reporting categories.


As part of its Q1 fiscal 2014 earnings, Microsoft is using its new reporting structure with five totally new divisions, in its reporting. ZDNet's Larry Dignan has the breakout using the new categories.

Those new categories mash up a bunch of products from unrelated divisions into new reporting units. (Example: "Devices & Consumer -- Other" includes Bing & MSN; Office 365 Home Premium; First-Party Video Games and Marketplaces.)

Luckily -- at least for this quarter -- Microsoft also is still providing those of us who watch the numbers with charts breaking out earnings around the old, familiar five business units: Client, Microsoft Business Division (MBD) Server & Tools, Online Services, and Entertainment & Devices.

Using the old categories, it's easier to see where the soft spots were in Microsoft's strong first quarter. There are two that jump out: Windows client and Entertainment & Devices.

Here's the comparative revenues chart:


And the comparative net income chart:


These charts make it a bit easier to see that Windows struggled during the quarter, as did Entertainment & Devices. (Online Services is still losing money, but less.) Windows client income was down 20 percent, compared to the year-ago quarter, which was right before Microsoft launched Windows 8. Income from Entertainment & Devices was down 171 percent compared to the year-ago quarter. 

In the slide deck explaining results, Microsoft officials noted that consumer sales of Windows (non-Pro versions, as they're described) were down this quarter. Windows OEM revenues weren't as bad as Microsoft was expecting. On the plus side: Surface revenues (which are reported into Windows client) for this quarter were $400 million. Microsoft officials said they sold double the number of Surfaces this quarter that they did in the previous calendar quarter. (Note: We don't know what either of those numbers are.) Surface RT sales were better than anticipated, officials said, while some potential Surface Pro customers held off, waiting for the Surface Pro 2.

Entertainment & Device income was down, as Xbox sales have seemingly slowed ahead of the November 22 launch of the new Xbox One. Entertainment & Devices also includes Windows Phone sales and Android patent licensing, neither of which are broken out specifically. 

It's clear whether one looks at the old reporting structure or new reporting structure breakouts that Microsoft is continuing to fire on all cylinders with its enterprise products and services and has a ways to go on the consumer side.

Topics: Microsoft, Tablets, PCs, Windows


Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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  • Surface seems to be selling well at Best Buy

    "Microsoft officials said they sold double the number of Surfaces this quarter that they did in the previous calendar quarter. (Note: We don't know what either of those numbers are.) Surface RT sales were better than anticipated, officials said, while some potential Surface Pro customers held off, waiting for the Surface 2 Pro."

    For what it's worth, Surface appears to be selling well now at Best Buy:

    Who knows? Maybe sales will continue well throughout the current quarter? When all is said and done, these devices are absolutely gorgeous; and the Surface 2 is way better than the iPad in most respects except for sheer quantity of touch based apps. There are a lot of people out there who are buying iOS and Android tablets now, and aren't concerned about Windows apps backwards compatibility. Maybe MS can win a lot of these people over to Surface 2. It's something of long shot; but maybe MS has come upon the formula necessary for many ordinary people to accept Surface with Windows RT.

    As for Surface Pro 2, a lot of reviewers seem to believe that there are no use case scenarios outside of the iPad's, when it comes to touch computing. This is course is nonsense. If the Surface Pro 2 is too heavy to carry around and use like an iPad, then don't use it like an iPad. Use it instead as a hyper mobile portable device, and just sit down at a desk, or rest it on your lap, and use it. In the future their will be a myriad of devices of varying sizes with touch screens, which will be used in many diverse ways.
    P. Douglas
    • The Surface Pro 2 is an ideal college student machine

      * Long battery life (not iPad-long, but much longer than any laptop that's was available before Haswell shipped),
      * extremly small and light (again, not tablet-light, but amazingly laptop-light),
      * it runs full Windows (which means all those apps (like MatLab or Visual Studio or Eclipse for engineering students) run, and
      * it has a stylus which makes it a great OneNote machine (students can get Office cheap)
      • which would explain a very good calendar 3rd quarter

        As would the price cut to US$350.

        MSFT finally priced the Surface RT and Surface Pro in July to clear inventory, and they succeeded. Time will tell whether Surface 2 and Surface Pro 2 also need to be at their predecessors' current prices. 4th quarter holiday sales will be an indicator.
  • MS a company for the enterprise

    And a very good one.
    Entertaining and devices revenue is interesting, if the entire revenue were coming from android agreements, MS would be making about $10 for each android - obviously it's a lot, lot less, I would say $2 in average.
  • Bring Back Steve Ballmar !

    Seriously, these are better than expected figures from Microsoft, and yet the board seems to think that Steve should be replaced, by a Car manufacturer CEO some ten years older. And these figures posted, whilst Microsoft are in the middele of a big transition.

    I think maybe those on the Microsoft board that were instrumental in asking Steve B to leave, should reconsider their own positions (inc B Gates).
    • Yeah, unbelievable.

      Microsoft's board have proven that they are a bunch of idiots. They're replacing a guy with no vision with another guy who is worse. The new guy is not only older, and from a completely unrelated industry, but also has little understanding of technology. What they really needed was a young, charismatic tech geek with a cool vision of the future. Instead, they're hiring an old fart businessman who will probably replace the chips in their hardware products with vacuum tubes.
      • The new ENIAC Surface?

        Boy that would get hot on the lap, if you can get it on your lap. :)

        We'll see what they do. I hope Microsoft is smart enough to bring someone on who is a little disruptive, but a little careful too. Not many people can run a company this big, so I'm sure there are limits to how many people they can headhunt.... but hopefully, they find someone with a great mind, and a hefty sense of caution too. Ray Ozzie springs to mind.
      • Mulally

        MS would be fortunate to get Mulally. People portray him as a bumbling old man who is out of touch. Please. The man has an engineering degree from MIT. He had an amazing career at Boeing working in their space division. He turned Ford around WITHOUT using bailout money. A smart CEO is smart CEO, period.
        born here
    • Ballmer may have destroyed MS's future

      This is very short term thinking. Ballmer is pumping the well with legacy products and very few new ones. He completely missed the train on Cell phone and pads, so while the reset of the world has started the migration to more mobile device provided by Apple and Google, MS is struggling to put a dog in the fight 2 to 4 years late.

      Dumping Ballmer was a must if MS is to move forward, Sales men never make good CEOs.
      • WP is doing good elsewhere.

        It's done good enough to be the 3rd best platform in mobile. It also beats out Apple in other parts of the world. You're right about MS being slow to the party but things are starting to change and numbers are increasing...sure it's not as fast but I think some consumers are seeing that MS has a lot to offer and they also inject a fresh breath of air in a stale and boring IOS, Android landscape.
        • Perhaps but....

          First off it would have been pretty hard not to grow based on the initial low adoption of these devices. That being said they are a very distant 3rd place. Apple owns the high end and Android the Mid and low end. Both are very good solution with lots of Apps. This leave WP in the cold with a comparable weak offering and no real development happening. This leave WP with three basic customers

          1) the MS fan-boys
          2) Bargain hunters (foreign growth)
          3) Uneducated buyers who think they are getting an Android or iPhone equal.

          There ius just no real reason to buy an WP, both Android and IOS offer better solutions for the same price.
          • WP is not weak

            It is strong and will be much stronger in 6 months with WP8.1 (notification center, Cortana, new APIs, etc.), Nokia purchase completed, and Enterprise Pack released.
        • Third in the same way that Neptune

          is the third largest planet in the solar system. Next to Jupiter however, it wouldn't look much bigger than the red spot.
  • Two Microsoft Q1 FY2014 charts you'll want to see

    Still looks good. Microsoft is on the right track with their entertainment division. Being as diverse as they are, they will pull through.
  • What is "corporate level activity"? And revenue vs. income discrepancy?

    What are the products/services in this division? Is this just a catch-all for "everything else", e.g. merger and acquisitions costs, legal costs etc.?

    That would explain why there's a $1.3B loss - it generates no (well, little) income, but includes huge expenses. Is that why the discrepancy?
  • Imagine then, how strong MS will be when the "soft spots" also start

    producing numbers equal to what the enterprise sector is producing.

    Google and Apple and IBM and others, will be calling for the feds to break up the company. Once WP and Surface tablets and Windows 8 start getting the numbers that they should, the MS stock will soar to stratospheric heights.
  • There's a big disconnect between what investors see in Google vs what they

    see in Microsoft.

    Microsoft comes and earns $5.24 billion in a quarter, and Google earns $2.97 billion, yet, the investors have Google's market cap at around $339 billion, while MS has a market cap of about $298 billion. If earnings and a more secure future were to be of any value, then the MS market cap should be at least double that of Google.

    So, what is it that investors see in Google, besides a lot of hype and a name that is also synonymous with "search"?
    • what is it that investors see in Google?

      • That advertising is not productive enought to even beging to compete

        against MS's earnings. Even MS has advertising in its portfolio, and if you had bothered to look at the report, Bing itself was beginning to produce, big time, in regards to advertising. Advertising is just one product in MS's huge portfolio of products and services, and Google is still, basically, a one product company with advertising (via search).

        You failed to answer the question I posed, and that is about why Google has a higher market cap when it's not as productive as Microsoft, and it can't even begin to compete against Microsoft when it comes to the number of productive products and services.

        Advertising via search for Google won't ever be productive enough to maintain that high a market cap.
  • Good days lie ahead for Microsoft

    Hardware revenues are expected to grow 35-45% because of the surface tablet gaining share and the upcoming launch of the new Xbox one in the holiday season.
    All the implementations of new policies indicate only one thing for Microsoft, That good days lie ahead.
    Zack Tyler