MSFT Quarter: Revenues Down 14 Percent, But Beat Estimates

Microsoft announced quarterly revenues of $12.9 billion, a decline of just over 14 percent from the same period a year ago. Adjusted revenue, which accounts for $1.5 billion in deferred Windows 7 receipts put the quarter at $14.4 billion, just 4 percent down vs. a year ago. Profits were also down. Online services (where Bing is housed) had revenues of $490 million and a $480 million loss vs revenues of $520 million and losses of $321 million a year go.

The conference call is going to start in a few minutes but the company’s slides highlight strong Windows (7) and Xbox demand. PC growth was up 2 percent compared with a year ago but up in the “mid teens” vs. the previous quarter. There have been concerns that the movement of the consumer market to lower-cost PCs and netbooks is going to hurt Microsoft over the long term.

The company also highlights that Bing “market share in US up every month” and “US search revenue up mid-single digits.” For the rest of the year Microsoft predicted growth in Online Services but said that entertainment and devices would be flat.

Microsoft is a hugely profitable company with tons of cash and it will continue to be a force in the markets it competes in. However it faces more competition and greater vulnerability in some of its core markets than in the past. And in the strategic area of mobile it’s not been able to match competitors with its offerings. Windows 6.5 has received tepid reviews at best in contrast to Android, which now has as much or more buzz in the market than every competitor save the iPhone.

Failure by Microsoft to improve its Mobile OS and better compete against the iPhone, RIM and Android will put the company at a long-term strategic disadvantage.

Here’s an interview between the Wall Street Journal and Microsoft CEO Steve Ballmer in which he says, as one might expect, many positive and optimistic things about Microsoft’s competitive position and the future.

About The Author

Greg Sterling

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.