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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

January 19, 2012 at 1:32 PM

[Updated] Microsoft’s 2Q results slightly exceed forecasts

Despite a decline in sales in the Windows division – one of Microsoft’s mainstays – and a slight decline in profit, the company posted record revenue during the second quarter of its fiscal year and slightly exceeded analysts’ estimates.

Bolstered by sales of the Xbox and products in its Server & Tools business, Microsoft reported $20.89 billion in revenue for the quarter ended Dec. 31, a 5 percent increase from the year-ago period.

The company marked $6.62 billion in profit, down slightly from $6.63 billion a year ago

Earnings per share reached 78 cents, exceeding analysts’ estimates of 77 cents — the same as in the year-ago quarter.

The Windows and Windows Live division division posted revenue of $4.74 billion, down 6 percent from a year ago.

Microsoft had warned analysts earlier this month that PC sales would likely drop faster than expected in the second quarter, particularly because of floods in Thailand. Because factories in Thailand make a substantial portion of the world’s hard drives, fewer PCs are manufactured when there are fewer hard drives, resulting in fewer copies of Windows sold.

Some research firms did not show a steep drop in PC shipments, however. Gartner estimated that worldwide PC shipments had declined 1.4 percent in the fourth quarter of 2011 compared with the year-ago period. Another research firm, IDC, put the decline at 0.2 percent.

Here’s how the other divisions did:

  • The Business division, which includes Office, Lync, SharePoint, Exchange and Dynamics, reported $6.28 billion in revenue, up 3 percent from a year ago.

    Microsoft notes that the revenue figure marks a 7 percent increase from the year-ago period, excluding the prior-year recognition of $224 million of deferred revenue related to the Office 2010 technology guarantee program.

  • The Server & Tools business posted $4.77 billion in revenue, up 11 percent. Lisa Nelson, Microsoft director of investor relations, attributed the growth to “strong demand from CIOs as they think about transitioning their businesses to the cloud.”

    There was double-digit growth in the Windows Server and SQL Server premium editions and more than 20 percent growth in System Center revenue.

  • The Entertainment and Devices division posted revenue of $4.24 billion, up 15 percent.

    “We had a record holiday season,” Nelson said, with about 8.2 million Xbox 360 consoles sold in the second quarter – a growth of 25 percent year over year.

    Xbox was the number-one game console for the U.S. in 2011, and in December, had 46 percent of the market.

    The installed base for Xbox 360 is now 66 million, and there are 40 million Xbox Live users worldwide – up 33 percent from a year ago.

    Kinect, Microsoft’s motion- and voice-controlled sensor, now has an installed base of 18 million, Nelson said.

  • The Online division reported revenue of $784 million, up 10 percent. While the division – which includes Bing – is still losing money, the losses have decreased. In the second quarter, the division lost $450 million, down from a $550 million loss this time last year.

    Nelson attributed that to the work Microsoft and Yahoo are doing to improve revenue per search. “It’s still a loss but it’s definitely a step in the right direction,” she said.

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