Microsoft seeing sales of its Windows 7 operating system slip and has lowered its overall expectations for the year.
The Windows division posted revenues of $4.74bn (£3.01bn), a 6% decline from the prior period. Overall, the company quarterly revenue of $20.89bn (£13.5bn) for the quarter ended December 31, 2011, a 5% increase from the prior year. However, its net income remained flat at $6.62bn (£4.3 billion), down slightly from the 6.63bn (£4.28 billion) a year ago.
The company also announced it is revising its guidance for the year downwards, to $28.5-28.9bn (£18.4-18.7) for the year ended June 2012.
CEO Steve Ballmer said he was happy with the results leading into ‘a launch year that will accelerate many of our key products and services.’
"Coming out of the Consumer Electronics Show, we’re seeing very positive reviews for our new phones and PCs, and a strong response to our new Metro style design that will unify consumer experiences across our phones, PCs, tablets, and television in 2012."
Microsoft has sold over 525 million Windows 7 licenses since launch, and 175 million licenses in the September to December quarter.
The operating system remains Microsoft’s best selling system ever. By comparison, Windows XP sold 210m copies in two and half years. After 18 months, Vista had sold 180m licenses (no further data is available, and Vista is still officially supported by Microsoft) despite being considered a flop.
Microsoft has been making a lot of noise about its Windows 8 operating system and its Metro interface, due at the end of this year as its first ‘post-pc’ operating system – built for tablets and smartphones with ARM processors – as much as for high powered Intel i7 desktops and laptops.
The rising popularity of Apple’s vertically integrated software and hardware model has forced the whole industry to rethink its business strategy. For the first time in a generation Windows is not seen as an effective monopoly.
CES 2012 saw most PC manufacturers releasing super slim ‘Ultrabooks’ to compete with Apple’s Macbook Air laptops. The industry is banking on this new product segment to help restore market share, given that most have been unable to compete with Apple’s dominant lead in the tablet market with its iPad. Microsoft is also banking on ultrabook sales to pushing back up license sales for Windows 7 across the last two quarters as a ‘last hurrah’ before Windows 8 launches, expected to be in October, part of the 2013 financial year.
"In addition to the continued strength of our commercial business, this holiday season was the strongest in Microsoft history, thanks to good sales execution and compelling products like Xbox 360 and Kinect," said Kevin Turner, chief operating officer at Microsoft.
"We are seeing a lot of excitement for new devices, from Windows 7 Ultrabooks to new Windows Phones, as well as growing anticipation for Windows 8," he said.
The company’s Entertainment and Devices division, home of the Xbox 360 games console, continues to go from strength to strength on the back of its Kinect motion sensor accessory. The Christmas period helped boost revenue by 15% to $4.24bn (£2.74bn). The Xbox 360 installed base now totals approximately 66 million consoles and 18 million Kinect sensors. Xbox LIVE now has 40 million members worldwide, an increase of 33% from the prior year period.
Other key figures
The Business Division reported $6.28bn (£4.06bn) in second quarter revenue, a 3% increase.
Nearly 200 million licenses of Office 2010 have been sold in the 18 months since launch.
Revenue from Exchange and SharePoint grew by 10%; revenue from Lync and Dynamics CRM grew by more than 30%.
Server & Tools business posted $4.77bn (£3.08bn) in second quarter revenue, an 11% increase from the prior year period.
The Online Services Division reported revenue of $784m (£507m), a 10% increase from the prior year period.
Bing’s US market share grew to 15.1% while Bing-powered US market share, including Yahoo! properties, was approximately 27%.