Microsoft quarterly results reflect troubled PC market, middling Windows 8 launch
Microsoft this week announced its second quarter of fiscal 2013 earnings, revealing more than 60 million Windows 8 licenses sold. Industry observers, though, remain cautious on the software giant in light of trends in the PC sector.
Microsoft declined to provide sales numbers for the Surface RT.
The Redmond giant pulled in $21.5 billion in revenue for the quarter, with a profit of $6.38 billion, or $0.76 per share, up from $5.87 billion a year ago and $5.31 billion for the quarter previous. Of that figure, the Windows division accounted for about $5.9 billion in profit.
Despite the profit uptick, Wells Fargo senior analyst Maynard Um sees overall PC industry dynamics remaining difficult for Microsoft. In a note to analysts on Friday morning, Um noted that the enterprise sector is still largely moving to Windows 7 â which surpassed Windows XP in install base last year â and that consumer demand for Windows 8 remains soft.
On the consumer end, Microsoft is caught between a soft economy â which hampers demand for new Windows 8-based machines â and the rise of smartphones â sectors dominated by Apple and Google's operating systems. These two trends have kept consumer PC demand soft, and Um doesn't expect any meaningful upward shifts in PC unit sales until Windows 8 units are able to hit lower price points.
With regard to Microsoft's own smartphone and tablet efforts, signs are mixed. Manufacturing partner Nokia, which has staked its future on the success of the Windows Phone 8 platform, moved 4.4 million Lumia units last quarter, showing solid improvement as it attempts to crawl back from the brink.
Microsoft gave no word, though, on how fared its first major computer hardware initiative, the Surface RT. The Windows RT-based tablet debuted late last year to mixed reviews, and CEO Steve Ballmer has characterized sales as "modest."
In neither the quarterly report nor the accompanying conference call, however, did Microsoft's executives go into detail on exactly how well Microsoft's first tablet sold. They opted instead to speak in general terms, citing "really great demand" for "some of the touch devices that we brought to market." Chief financial officer Peter Klein said several times that Surface sales were among the top three drivers of Microsoft's 11 percent total revenue growth, alongside Windows retail upgrades and multi-year enterprise licensing deals.
The device is estimated to have sold around a million units since its launch, though it was available initially only at Microsoft's online and physical stores before retail availability was expanded.