Microsoft earnings illustrate move to devices and services from software; A picture of the new Microsoft – one transformed from a software factory into a maker of devices and online services – has come into sharper focus
January 25, 2014 Leave a comment
Microsoft earnings illustrate move to devices and services from software
SEATTLE — A picture of the new Microsoft — one transformed from a software factory into a maker of devices and online services — has come into sharper focus.
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6 HOURS 31 MIN AGO
SEATTLE — A picture of the new Microsoft — one transformed from a software factory into a maker of devices and online services — has come into sharper focus.
The old Microsoft had an almost unmatched ability to chug out profits by selling software on discs to customers. The new Microsoft has an expanding portfolio of hardware products with decidedly lower margins.
That was clear on Thursday, when the company reported a 14 per cent increase in quarterly revenue — in large part from brisk holiday sales of its new Xbox game console and Surface tablets — and a 3 per cent rise in profit.
Microsoft management has been coaching Wall Street for some time to expect major changes in its business as it refashions itself to what it calls a devices and services company.
The person driving that change at Microsoft has been Mr Steve Ballmer, its Chief Executive. But if the vision is going to be seen through to the end, it will be by someone other than Mr Ballmer, who is stepping down in the coming months. His successor was not named on Thursday, as the search for a new leader dragged on.
The holidays are an especially strong time for hardware sales and they offered a good test of the company’s evolving focus. The new Xbox One turned out to be one of the most sought-after gifts this year and Microsoft’s new versions of the Surface tablet received better reviews than its first tablet offerings.
Those sentiments translated into sales. Microsoft sold 7.4 million Xbox consoles, including the Xbox One and the older Xbox 360, up from 5.9 million a year ago. And revenue from the Surface tablet more than doubled to US$893 million (S$1.14 billion) from the previous quarter.
In the last quarter ended Dec 31, revenue from devices and consumer hardware rose 68 per cent to US$4.73 billion, growing faster than any other part of the company.
“The real growth you see is hardware,” said Mr Brendan Barnicle, an analyst at Pacific Crest Securities. “It was the devices and consumer business driving everything in the quarter.”
And Microsoft’s hardware ambitions are only getting bigger, too, with the company nearing the completion of its US$7.2-billion deal to acquire Nokia’s handset business.
THE NEW YORK TIMES
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