Microsoft financials: record revenue, consumer sales declining in drift towards Enterprise

Microsoft has announced record revenue for its second financial quarter, October-December 2013. Revenue was bumped up by the launch of Xbox One (3.9 million sold) and new Surface hardware. The real stars though were the server products:

  • SQL Server continued to gain market share with revenue growing double-digits.
  • System Center showed continued strength with double-digit revenue growth.
  • Commercial cloud services revenue more than doubled.
  • Office 365 commercial seats and Azure customers both grew triple-digits.

says the press release.

Another plus point is Bing, which Microsoft says now has 18.2% market share in the USA. Search advertising revenue is up 34%.

It is not all good news. While Microsoft is doing fine in server and cloud, the consumer market is not going well, leaving aside the expected boost from a new Xbox launch:

  • Windows OEM non-pro revenue down 20% year on year (that’s consumer PCs)
  • Office consumer revenue down 24% year on year – partly attributed to the shift towards subscription sales of Office 365 Home Premium

As usual, I have put the results into a quick table for easier viewing:

Quarter ending December 31st 2013 vs quarter ending December 31st 2012, $millions

Segment

Revenue

Change

Gross margin

Change

Devices and Consumer Licensing

5384

-319

4978

-153

Devices and Consumer Hardware

4729

+1921

411

-351

Devices and Consumer Other

1793

-206

431

-455

Commercial Licensing

10888

+753

10077

+751

Commercial Other

1780

+391

415

+199

The categories are opaque so here is a quick summary:

Devices and Consumer Licensing: non-volume and non-subscription licensing of Windows, Office, Windows Phone, and “ related patent licensing; and certain other patent licensing revenue” – all those Android royalties?

Devices and Consumer Hardware: the Xbox 360, Xbox Live subscriptions, Surface, and Microsoft PC accessories.

Devices and Consumer Other: Resale, including Windows Store, Xbox Live transactions (other than subscriptions), Windows Phone Marketplace; search advertising; display advertising; Office 365 Home Premium subscriptions; Microsoft Studios (games), retail stores.

Commercial Licensing: server products, including Windows Server, Microsoft SQL Server, Visual Studio, System Center, and Windows Embedded; volume licensing of Windows, Office, Exchange, SharePoint, and Lync; Microsoft Dynamics business solutions, excluding Dynamics CRM Online; Skype.

Commercial Other: Enterprise Services, including support and consulting; Office 365 (excluding Office 365 Home Premium), other Microsoft Office online offerings, and Dynamics CRM Online; Windows Azure.

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