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Windows 7 sales bring record revenue
2010-01-29 Article Rating:  / 0
Announcing results for the second quarter of its 2010 financial year, Microsoft reported a 14 percent increase in year-over-year revenue, to $19.02 billion. Meanwhile, net income jumped 60 percent to $6.6 billion, according to the company.
Microsoft's results could be interpreted as a sign of economic recovery. After all, they represent a strong improvement over the revenue and net income the company reported for Q1 FY2010, which was $12.92 billion and $3.57 billion, respectively. Peter Klein, chief financial officer at Microsoft, stated, "Exceptional demand for Windows 7 led to the positive top-line growth for the company. Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth." Kevin Turner, the company's chief operating officer, added, "This is a record quarter for Windows units. We are thrilled by the consumer reception to Windows 7 and by business enthusiasm to adopt Windows 7." According to Microsoft, Windows 7 and Windows Server 2008 R2 launched globally on Oct. 22 as anticipated. Through the second quarter, the company says, it sold "over 60 million Windows 7 licenses, making it the fastest selling operating system in history." But, in a conference call for investors yesterday afternoon, company executives said that while consumer spending was up, enterprise software spending remains flat. Bill Koefoed, the company's general manager of investor relations, said, "We have not seen a return to enterprise growth." What about embedded ... ? As usual, it's very difficult to determine how Microsoft's embedded business -- presumably relatively independent of shifts in consumer confidence -- impacted its bottom line. During both their formal remarks in the conference call and a subsequent Q&A, executives made little mention of the company's embedded operating systems. Microsoft has five divisions: Windows & Windows Live, Business, Server and Tools, Online Services, and Entertainment and Devices (EDD). The last of these, EDD, is responsible not only for Microsoft's embedded OSes -- Windows Embedded Standard, Windows XP Embedded, Windows CE, and Windows Mobile, for example -- but also for consumer products such as the Xbox 360 gaming console and Zune music player.  Microsoft EDD revenue for Q2 of FY2010 (Click to enlarge) Source: Microsoft According to Microsoft, EDD revenues were down year-over-year, going from $3.25 billion in Q2 FY2009 to $2.08. Xbox 360 console sales, at 5.2 million for the quarter, were down 13 percent year-over year. However, the company adds, "software attach" continued to be the industy's best, at 8.8 percent, while a shift toward "Elite" and "Special Edition" consoles meant that average selling prices declined only slightly. No mention was made during formal remarks of the company's embedded operating systems. However, Peter Klein responded to a question about a recent EDD reorganization by saying, "You do need to separate mobile from the entertainment side or the Xbox side. The Xbox is in a very good position right now." Implying that Windows Mobile needs work, Klein added, "On the mobile side our strategy remains the same. As we have been saying from a product perspective, we are working very hard on the next version of Windows Mobile." Meantime, desktop editions of Windows, such as Windows 7, the outgoing Windows Vista, and Windows XP are all part of Microsoft's Windows & Windows Live division (formerly known as the Client division). Here, consumer Windows 7 sales drove record results, bringing year-over-year revenue up 28 percent, to $5.19 billion. Microsoft noted that accounting rules required it to defer the revenue from Windows 7 pre-orders , meaning that $1.7 billion had to be omitted from its books. With Windows 7 added back in, as pictured below, revenue was said to reached $6.9 billion.
Microsoft Windows & Windows Live revenue for Q2 of FY2010 According to Microsoft, the PC market grew 15 to 17 percent year over year, and OEM revenue for Windows licenses grew even further, at 21 percent. All this was largely thanks to consumers, the company added, since business PC sales were essentially flat. Windows 7 is seen as significantly more netbook-friendly than was Vista, and the new OS has largely replaced Windows XP on newly released mini-laptops. Microsoft says that during the quarter, netbooks represented about 11 percent of the total PC market, adding that more than 90 percent of the devices shipped with Windows 7.
To see Microsoft's own earnings release, plus the PowerPoint presentation for investors from which the above graphs were extracted, see the company's website, here. For further coverage, see our sister site eWEEK.com, here. A transcript of the Microsoft earnings call for investors may be found on the Seeking Alpha website, here. Related stories:
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