Microsoft (Nasdaq: MSFT) revealed its quarterly earnings Thursday, and despite stalled sales of Windows, strong Xbox 360 and Kinect numbers boosted the company's to revenue 8 percent higher than the same period last year, at US$17.37 billion.
Operating and net incomes also increased by 4 and 30 percent, respectively, on the year, at $6.17 billion and $5.87 billion.
Entertainment technologies like the Xbox 360 and Xbox Live drove the jump in profits. The Entertainment and Devices Division, to which the console belongs, reported revenue of $1.49 billion, up 30 percent from last year.
The Microsoft Business Division was the other big earner. The Microsoft Office producers showed a 7 percent bump in earnings to $5.78 billion. Annual revenue for the division is up 16 percent to $22.19 billion.
Microsoft Office products and the Xbox 360 continue to be the leading sellers in their respective markets.
Windows was Microsoft's only division to see a slump in revenue. It brought in $4.74 billion, a 1 percent drop for the quarter and a 2 percent dip for the year. The company reported those figures were misleading, as revenue was slated for Windows 7 prior to its launch. The product continues to sell well and the company expects it will stay in line with PC growth.
The more future growth there is in emerging markets relative to developed is more headwind for Windows growth relative to the overall PC market," said Microsoft CFO Peter Klein, on a conference call with financial analysts, after Microsoft reported earnings.
Still, some analysts believe it's not too late for Microsoft to become a player in tablets. The Windows 8 family, which will most likely ship sometime next year, will include a version designed designed to run on tablets powered by ARM's system-on-a-chip architecture. It will also feature an interface that can display full-screen, touchable apps.
"We believe Microsoft will be a major player, with its partners, in the tablet space, particularly when they come out with Windows 8," said Ticonderoga Securities analyst Neil Herman, in an interview on CNBC. "Don't give up on Microsoft.
Windows also remains strong in the enterprise, where sales were up 8% in the quarter. Klein said 25% of the enterprise market has now upgraded to Windows 7, while 90% are committed to doing so.
Overall, Microsoft reported that fourth-quarter operating income rose 4% year-over-year, to $6.17 billion on revenue of $17.37 billion. Earnings per share (EPS) came in at 69 cents. They beat Wall Street analysts' expectations of 58 cents EPS and revenue of $17.25 billion.
Microsoft shares were off 0.92% in pre-market trading Friday.
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