Microsoft Q3 earnings and revenue up, as all divisions make gains

In the wake of dismal PC sales reports from market researchers, Microsoft shows that Windows sales increased

Microsoft increased revenue across all its divisions in its third fiscal quarter, achieving an almost 20 percent revenue increase year on year.

For the quarter ended March 31, 2013, Microsoft generated revenue of US$20.5 billion, up 18 percent compared with the same quarter of 2012, the company said Thursday.

Net income came in at $6.06 billion, or $0.72 per share, compared with $5.1 billion, or $0.60 per share, in 2012's third quarter.

On a pro forma basis, factoring in certain one-time items, including net revenue recognition for Windows and Office upgrade offers and pre-sales, as well as the European Commission fine, revenue was $18.8 billion and earnings per share were $0.65.

The Business Division, which includes Office, increased revenue 8 percent to $6.32 billion. Adjusted for the revenue recognition of the upgrade offer and pre-sales, revenue grew 5 percent.

Microsoft launched the new version of the Office desktop productivity application suite at the end of January, introducing for the first time the option to license the product as an annual subscription. It remains to be seen whether that model will catch on with consumers accustomed to paying for Office once and getting a "perpetual" license for it.

The Server & Tools business racked up $5.04 billion in revenue, up 11 percent, helped by strong sales of SQL Server and System Center.

The Windows Division brought in revenue of $5.7 billion, up 23 percent, but adjusting for the revenue recognition related to the upgrade offer, the revenue growth was flat. This division also includes the Surface tablets.

Revenue shot up 18 percent to $832 million at the Online Services Division, spurred by a 22 percent increase in online advertising revenue.

The Entertainment and Devices Division had revenue of $2.53 billion, up 56 percent, but when adjusted for the revenue recognition related to a video game deferral, revenue rose 33 percent.

CFO Peter Klein said in a statement that the company's "diverse business continues to deliver solid financial results." Microsoft also announced that Klein will leave the company at the end of the fiscal year and that a replacement will be named in the coming weeks.

The earnings report comes about a week after IDC reported that global PC shipments plunged almost 14 percent year on year in the first quarter, its biggest quarterly decline ever, blaming the disaster in part on "a weak reception for Windows 8."

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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Juan Carlos Perez

IDG News Service
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