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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 24, 2013 at 4:15 PM

Microsoft strikes back, but Amazon’s temporarily bigger

If it weren’t for the fog around here lately, you’d see cash raining on Seattle tech companies.

Investors this afternoon poured about $27 billion into Microsoft and after the region’s biggest tech companies reported strong earnings in the past quarter.

In after-hours trading, the market cap of Amazon rose $12 billion and Microsoft rose $15 billion. At last check MSFT was up 5.4 percent to $35.55 after touching $36 and AMZN was up $27.59, to $359.80.

Amazon is marching confidently into a strong holiday season so the enthusiasm isn’t too surprising.

In contrast, some were taken aback when  Microsoft reported 17 percent growth in profit and record sales of $18.5 billion.

The company’s earning report stands as the latest rebuttal to hostile investors who have pushed for radical changes and perhaps a breakup of the world’s largest software company. Since word of their backstage jostling surfaced last spring, Microsoft has begun the process of replacing its chief executive, upped its dividend by 22 percent and bought the mobile operations of one of the world’s largest phone makers.

Microsoft’s report was a reminder that it’s too big and diversified to be judged solely by how its gadgets stack up against the latest consumer product from Apple.

Its sales of cloud computing services were up 103 percent in the quarter, search ad sales were up 47 percent and even the fledgling Surface tablets generated $400 million in sales.

Consumer hardware and software accounted for less than a third of the company’s $18.5 billion in sales last quarter. Microsoft devices and consumer hardware sales totaled $1.48 billion, up from $1 billion a year before, but its gross margin on those sales was just $206 million.

Chief Financial Officer Amy Hood didn’t sound too concerned about the confused and bleak future of the PC industry that Apple Chief Executive Tim Cook portrayed during Tuesday’s iPad launch.

Hood said her company is outperforming its competitors, and customers are committing to Microsoft’s platform, as evidenced by growing sales of three-year corporate software contracts.

“It speaks a lot to the innovation and roadmap we’ve shown,” she told investors during today’s conference call.

But there is one area where Microsoft is trailing its chief cloud-computing rival.

Amazon is hiring people at a much faster rate and now has more employees worldwide than Microsoft.

Amazon noted in its earnings report that it now has 109,800 employees, up 35 percent from the previous quarter.

Microsoft employed 100,518 as of Sept. 30, up from 99,139 on June 30.

Amazon’s lead won’t last, though. Microsoft is expected to add 32,000 employees early next year when it closes its $7 billion acquisition of Nokia’s phone and services businesses.

Who knows, though, how many people Amazon will hire next to fill those big glass bubbles at its new Seattle headquarters?

Comments | Topics: amazon earnings, AMZN, microsoft earnings


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