Microsoft

Microsoft (NASDAQ: MSFT) beat the market expectations in the results announced on 23rd January, 2014. The beleaguered IT giant which has been struggling in the recent past generated $6.56 billion in profits and $ 24.52 billion in revenue in the fourth quarter for 2013 (Second Quarter of 2014 fiscal for Microsoft). During the same period last year Microsoft had generated $ 21.46 billion in revenue and gained a profit of $6.56 billion.

Microsoft Quaterly Perfomance

 

Microsoft has managed to stop the declining trend of revenue and income. During the last few quarters Microsoft’s revenue and profit was decreasing at a steady pace. Revenue which was $21.46 billion in Q2, 2013 had decreased to $18.53 billion in Q1, 2014 increased to $24.52 billion this quarter. The net income of the company which showed a decline on a Q-O-Q basis from $7.77 billion in Q2, 2013 to $6.38 billion in Q1, 2014 increased to $7.97 billion this quarter.

Microsoft devices

 

Microsoft has recently been struggling to survive in a fast changing technology market. Being a late entrant in certain markets, the company had to struggle a lot to claim its place and it looks as if finally it has started to make some inroads. The company had penned high hopes on the Surface 2 and Surface 2 Pro tablets launched in September and Xbox One gaming console launched in November. Both the devices didn’t fail the company during the holiday season and soon went out of stock across retail stores in North America.

Although Microsoft didn’t divulge the sales figures for Surface 2 it did report that the revenue from tablets nearly doubled to $893 million as compared to $400 million in the previous quarter. Microsoft also reported shipping 3.9 million Xbox One gaming consoles. Out of the 3.9 million boxes, 3 million were bought by consumers while 900,000 were in inventory.

“The investments we are making in devices and services that deliver high-value experiences to our customers, and the work we are doing with our partners, are driving strong results and positioning us well for long-term growth.”

– Steve Ballmer,CEO Microsoft

Since last quarter, the company had made changes to the way it reports its results. The company has now started reporting results in two parts “Device and Consumer division” (D&C), which includes results for OEM, Windows licensing, retail software, Xbox, Windows Phone and Bing advertising. While the “Commercial Division” which includes volume licence sales, server products and consulting.

This quarter, Microsoft’s revenue was boosted by good performance from both the divisions.

” Our Commercial segment continues to outpace the overall market, and our Devices and Consumer segment had a great holiday quarter,”

– Steve Ballmer,CEO Microsoft

 

Device and Consumer Division

D&C licensing revenue increased to $5.4 billion this quarter as compared to $4.34 billion in the previous quarter. Gross margin also increased to $5 billion from $4 billion in the previous quarter. On a year to year basis the revenue was down six percent and gross margin was down three percent. This decline has been attributed to a decline in the PC market. On the brighter side Smartphone related licensing was worth $1.0 billion for the quarter.

Microsoft Device and Consumer Division Revenue

D&C hardware revenue was up from $1.4 billion in the previous quarter to $4.7 billion in this quarter and gross margin increased from $0.2 billion to $0.4 billion. This increase was attributed to increased sales for the Xbox One consoles and Surface tablets. The company announced sales of 3.9 million Xbox One consoles and 3.5 million Xbox 360 units.

  • Windows OEM revenue declined 3%, reflecting strong 12% growth in Windows OEM Pro revenue, offset by continued decline in the consumer PC market.
  • Surface revenue more than doubled sequentially, from $400 million in the first quarter to $893 million in the second quarter.
  • The Company sold 7.4 million Xbox console units into the retail channel, including 3.9 million Xbox One consoles and 3.5 million Xbox 360 consoles.
  • Bing Search’s share grew to 18.2% and search advertising revenue grew to 34%.

D&C saw other revenue increases from $1.6 billion to $1.8 billion, while gross margin increased from $0.3 billion to $0.4 billion. This increase was attributed to an increase in search advertising 34 percent and Xbox Live purchases were up by more than 25 percent. However, the display advertising revenue, primarily on Outlook.com, was down by 32 percent.

Commercial Division

Commercial Licensing revenue grew to $11 billion from $9.5 billion in the previous quarter. Gross Margin increased from $8.8 billion in the previous quarter to $10 billion in this quarter. This increase was attributed to an increase in System Center revenue, SQL Server Premium licensing and Hyper-V.

Microsoft Commercial Licensing Division Revenue

Other commercial licensing revenue grew to $1.8 billion from $1.6 billion in the previous quarter. Gross margin increased from $0.27 billion in the previous quarter to $0.42 billion in this quarter. This was driven by strong cloud growth.

  • SQL Server continued to gain market share with revenue growing in double-digits.
  • System Center showed continued strength with double-digit revenue growth.
  • Commercial cloud services revenue have more than doubled.
  • Office 365 commercial seats and Azure customers both grew by triple-digits.

As of now it looks that Microsoft has bounced back and may be able to capture the market it has lost to other competitors. But, a lot of that depends on who new the  CEO may be and what his/her vision for the company is.

[ Source : Microsoft ]