Microsoft tops expectations with record revenue
By Glenn Chapman, AFPSAN FRANCISCO--Microsoft soared to record revenues in the last quarter, confounding Wall Street forecasts on the back of strong demand for Xbox consoles, Surface tablets and Internet “cloud” services.
January 25, 2014, 12:03 am TWN
The U.S.-based technology titan reported net income of US$6.56 billion on revenue that hit a record high of US$24.52 billion in the quarter that ended Dec. 31.
“Our Commercial segment continues to outpace the overall market, and our Devices and Consumer segment had a great holiday quarter,” said outgoing chief executive Steve Ballmer.
Microsoft shares climbed more than 3 percent to US$37.37 in after-market trade on the Nasdaq following release of the earnings figures.
“We delivered record revenue as demand for our business offerings remains high and we made strong progress in our Devices and Consumer segment,” Microsoft Chief Financial Officer Amy Hood said in the earnings release.
Sales of Surface tablets more than doubled from the previous quarter to hit US$893 million, and Microsoft sold 7.4 million Xbox videogame consoles, with 3.9 million of those being of the new-generation Xbox One.
Bing's share of the Internet search market grew to 18.2 percent while its share of the online search ad market grew about a third, according to Microsoft.
Meanwhile, money made from selling Windows software to computer makers slid by 3 percent due to continue soft demand by consumers for personal computers, according to Microsoft.
Microsoft built its empire on packaged computer software but has been under pressure to adapt to lifestyles revolving around mobile devices and programs offered as services hosted as services in the Internet “cloud.”
Microsoft reported that cloud services to businesses and consumers posted strong growth.
“They've got this new strategy they have been talking about for a while now, devices plus services, and both grew very healthily,” Forrester Research analyst Ted Schadler told AFP.
“This might have been a tipping-point quarter, at least in terms of that strategy.”
The switch from licensing or selling packaged software to pinning revenue on hardware such as Surface tablets and subscriptions to services has upfront costs and the promise of long-term payoffs.
While Surface sales surged, the revenue was less than what Microsoft spent on the tablets and the same is true for Xbox.
“We have remained focused on price point and gross margin,” Hood said while discussing Surface during an earnings call.
“Think about it as a goal we have as we continue to innovate the line.”