Is Microsoft’s Strategy Working? – Revenue Increases for Fiscal Q2


Microsoft is doomed!  —-  yeahright

Microsoft has just announced preliminary financial figures which show an increase in both overall revenue and net income (bottom line) for the second quarter of the current financial year. Overall revenue (total income) is up $3.6 billion compared to the equivalent period last financial year and net income (after expenses) has increased by around $180 million.

Here is the comparison according to Microsoft:

   Period       Total Revenue        Net Income
 Q2 2012 – 2013       $21.46 billion        $6.38 billion
 Q2 2013 – 2014       $24.52 billion        $6.56 billion

A recent Microsoft press release largely attributes the increased revenue to a strong showing in its Devices and Consumer segment which grew 13% to $11.91 billion:


Our Devices and Consumer segment had a great holiday quarter.

  • 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 share grew to 18.2% and search advertising revenue grew 34%.

Commercial revenue also enjoyed a successful quarter growing 10% to $12.67 billion.

Our Commercial segment continues to outpace the overall market.

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

While Microsoft openly admits that Windows OEM revenue has declined by around 3%, due to “continued softness in the consumer PC market”, it’s quite apparent that the Redmond giant is far from on its knees financially. In fact,  both the revenue and income numbers are well ahead of expectations from financial analysts.

My View – for what it’s worth

microsoft-logo2I believe the down turn in PC sales was always inevitable, regardless of any decisions made by Microsoft. The massive proliferation of mobile devices has irreversibly changed the way people interact with the internet, the ‘take anywhere – connect anywhere’ paradigm has well and truly exerted its influence. Add in the fact that PC hardware specs have remained relatively dormant over the same period, and you create the ideal atmosphere for a natural decrease in PC sales.

I’ve said many times that Windows 8 is the operating system Microsoft needed to create, purely from a fiscal point of view, and I believe these current figures tend to support that assertion, as well as possibly vindicate at least some of Microsoft’s decisions. Some desktop  users may well be disappointed with the direction Microsoft has chosen for its latest operating system but for Microsoft to ignore the massive shift in market place emphasis would have been tantamount to financial folly. After all is said and done, Microsoft is a corporation, and shareholders demand profits.


 

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About the Author

Jim Hillier

Jim is the resident freeware aficionado at DCT. A computer veteran with 30+ years experience who first started writing about computers and tech back in the days when freeware was actually free. His first computer was a TRS-80 in the 1980s, he progressed through the Commodore series of computers before moving to PCs in the 1990s. Now retired (aka an old geezer), Jim retains his passion for all things tech and still enjoys building and repairing computers for a select clientele... as well as writing for DCT, of course.

5 Comments

  1. Hi Jim,
    A visit to a techie friend at Harvey Norman at the weekend indicated that many people are very interested in purchasing HP, Acer and other lap-tops with Windows 7 OS.
    If people want a T-Model Ford, then give people what they want, not what the supplier wants to foist upon them.

    Regards,
    Jonno.

    • JoninOz,

      You imply that the desktop is a Model T. No, people don’t drive Model Ts; but, they still drive cars. Modern cars are a successor to the Model Ts, just as today’s desktops are successors to earlier desktops and Windows 7 is a successor to DOS.

      Microsoft did need to come up with Windows 8; but, it made a mistake of having it as a successor to Windows 7, rather than having it as a separate OS for tablets and smart phones, only. What Microsoft did indicates that it is having a hard time coming to grips with the current digital market.

      A desktop is not a tablet and a tablet is not a desktop. A desktop has a lot more capability that a tablet. A tablet has mobility which a desktop can never have. For many people, a tablet suits them just fine because they don’t need the full capability of a desktop. Businesses may have their employees use tablets; but, they rely on desktops for the nuts and bolts of running the business.

      The market for desktops has matured. Desktops will be replaced only as their owners see a need to do so.

      The market for tablets is a growth market and will continue doing so for quite a while. When it matures, its sales will look like that of desktops. Then, no doubt, the industry will come out with something else to spur sales. I have no idea what that will be; but, ten years ago, tablets and smart phones had not registered in the public consciousness.

  2. Yes, but Windows 7 can hardly be described as T model — the very successful Model T was but a second effort, following one that didn’t sell (unless you equate the model K Ford to Vista) — more to the point would be to call Windows 8 a prototype.

  3. Holy cow, Jim, you’re still under the influence of the kool-aid! Snap out of it man! Windows 8 is an impossible sell. Saying, we’re going to downgrade your capable, multi-tasking computer you spent years optimizing into a cell phone is just a suicidal position. Poll after poll shows that in spite our all our portable devices, the device that means the most, our favorite device is our PC. Our attitude toward Microsoft is shaped by our PC experience. It sucks.

    Windows 8 was not the only choice that could have been made. How about an operating system that knows what kind of device it is running on and which selects a GUI appropriate (capitalize that: APPROPRIATE!!!) for the system it is presently running on. If it finds itself on a cell phone you get the touch oriented big buttons (necessary because of cramped real estate). But on a PC you get the visually rich multitasking environment we demand. Same code. Different experiences, depending on device. No downgrades to equipment.

    Selling a downgrade is always going to be an impossible task. Buy all the writers you can, we, the customers know better. Especially us power users will never settle for Windows 8. We deserve and we will get something better. It may not be Microsoft who provides it, but Microsoft is at a crossroads. We will get what we want. Is Microsoft the company who will provide it?

    We don’t give a rat’s patootie about unified code. We care about the richness of experience that we have worked for years to achieve. Windows 8 is way below the bar of success.

  4. Windows 8 was not the only choice that could have been made. How about an operating system that knows what kind of device it is running on and which selects a GUI appropriate (capitalize that: APPROPRIATE!!!) for the system it is presently running on. If it finds itself on a cell phone you get the touch oriented big buttons (necessary because of cramped real estate). But on a PC you get the visually rich multitasking environment we demand. Same code. Different experiences, depending on device. No downgrades to equipment.

    Selling a downgrade is always going to be an impossible task. Buy all the writers you can, we, the customers know better. Especially us power users will never settle for Windows 8. We deserve and we will get something better. It may not be Microsoft who provides it, but Microsoft is at a crossroads. We will get what we want. Is Microsoft the company who will provide it?

    We don’t give a rat’s patootie about unified code. We care about the richness of experience that we have worked for years to achieve. Windows 8 is way below the bar of success.