Microsoft Q1 2013 Quarterly Earnings: Is Redmond Immune to PC Slump?

By Doug Barney April 18, 2013

The shocking news that PC sales fell 13.9 percent in this past quarter would have you thinking that Microsoft was on its way out. So how in the heck was Microsoft able to pull a billion in

extra revenue out of its hat?

Microsoft results were almost in line with analysts’ good expectations. Revenue for the third quarter was $20.49 billion, and profits came in at $6.06 billion. The Windows Division's pulled in an extra billion, raking in $5.7 billion this quarter compared to $4.62 billion in the same quarter a year ago.

Here are some key stats:

  • EPS: 72 cents a share
  • Total Revenue: Up over $3 billion compared to a year ago
  • Microsoft Business Division: $6.32 in revenue, up eight percent compared to the prior year.
  • Server & Tools: $5.04 billion of revenue, up 11 percent compared to last year
  • Windows Division: Revenue of $5.70 billion, up 23 percent
  • Online Services Division: Revenue of $832 million, up 18 percent
  • Entertainment and Devices: $2.53 billion in revenue, up 56 percent

IBM’s latest quarter showed cloud revenue was up 70 percent. Microsoft is likewise happy with its cloud wager.  “The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox LIVE, and Skype,” said Steve Ballmer, chief executive officer at Microsoft. “While there is still work to do, we are optimistic that the bets we’ve made on Windows devices position us well for the long-term.”

Oddly, despite a great quarter for revenue, Microsoft CFO Peter Klein used the earnings announcement as the perfect time to leave, resigning today.

Despite the lukewarm at best reception for Windows 8, analysts were expecting good things out of Redmond for Q3 2013. Expectations were for revenue of $20.54 billion with earnings per share of 68 cents, compared to last year’s quarter with an EPS of 60 cents on revenues of $17.42 – not too shabby.

Microsoft beat the earnings expectations, and barely missed the revenue predictions.

Microsoft Quarterly Track Record

Microsoft for most if its 41-year history, was on an unrelenting growth curve. The growth was steady but not entirely nuts like a Google or Facebook or Apple in recent years. But steady as you go, if you do it long enough, can build a truly colossal company.

The first sign of weakness was last summer when Microsoft had its first ever loss. That loss, of nearly $500 million, was due to a huge write-down for aQuantive. But it presaged two real problem quarters, Q3 2012 and Q1 2013 where revenue declined. This was a big change for a company used to record quarter after record quarter.

Quieting Critics

The earnings bump is a nice shot back at critics who have long argued that Redmond simply can’t keep pace with Google, Apple and Facebook. And let’s face it. Windows 8 is arguably a bigger embarrassment than Vista. At least people could figure out how to use Vista!

But despite its image, and critics questioning its innovation chops, Microsoft is no longer just a PC software company. It rules the market for commercial server operating systems, Exchange is by the far the biggest e-mail platform, SQL the same for database, it has a near ownership of the server management space, and Office, after more than 25 years, remains untouched by the competition.

In the pure consumer space, the Xbox has blown away Sony and Nintendo, who were in the market long before Microsoft.

In the smartphone space, Microsoft has struggled with sub-par operating systems. Windows Phone 7 was almost great, but lacked the spit and polish of iPhone and the massive app library of Android. Now Windows Phone 8, at least for Microsoft IT professionals, is truly a very good phone and boasts tight integration with Office, Exchange and Microsoft cloud services.

The biggest move away from the PC is th Microsoft cloud portfolio. Windows Azure is both a PaaS and IaaS and features SQL Server style database services.

On the SaaS side is Office 365, which has all the function of Microsoft Office as well as a smattering of server tools like Lync and Exchange. This is well-liked by users, except those that struggle with the complexities of administration.

And despite the fact that many IT pros and consumers are befuddled by the new interface of Windows 8, it is a new operating system and there is a lot of new sales and upgrade revenue that comes with it, even from an imperfect product. If Redmond can really make Windows 8 shine, perhaps with Windows 9, it can make bank in PCs and tablets simultaneously far into the future.




Edited by Jamie Epstein

TechZone360 Editor at Large

SHARE THIS ARTICLE
Related Articles

Microsoft Research Project Allows for Inexpensive 3D Scanning from a Smartphone

By: Christopher Mohr    8/27/2015

It is now possible to perform 3D scanning from a smartphone, without additional hardware or an Internet connection, thanks to a new Microsoft Research…

Read More

Amazon's Scaled Back Consumer Device Efforts, Dash Button, and More

By: Paula Bernier    8/27/2015

Word is that Amazon is scaling way back on its consumer devices efforts, having let go of dozens of Lab126 engineers who worked on its Fire phone, acc…

Read More

The 4K War is Brewing, but Don't Expect a Crowned Winner

By: Special Guest    8/27/2015

The hype around 4K Ultra HD video is growing and we're seeing it gain traction in real ways. From the NFL Network and CBS using 4K cameras to capture …

Read More

Wallet Wars Part 2: Thanks to EMV, the Force is with Mobile Wallets

By: Special Guest    8/26/2015

In December 2015, when "Star Wars: The Force Awakens" hits movie theatres across the U.S., a very different type of force will 'awaken' the mobile wal…

Read More

Major Automakers Forge Alliance to Combat Cyberattackers

By: Joe Rizzo    8/25/2015

If you take a few minutes to think about what hackers go after, you'll realize that it is anything that has an Internet connection. Thanks to the Inte…

Read More