Microsoft financials: Server and Office business still growing

Microsoft has announced its quarterly figures for July-September 2011. Despite its problems in mobile and in search, and the declaration of a post-PC era by competitors, the company is still a huge money-making machine. Here is my at-a-glance summary of the segment breakdown:

Quarter ending September 30th 2011 vs quarter ending September 30th 2010, $millions

Segment Revenue Change Profit Change
Client (Windows + Live) 4868 +83 3251 -335
Server and Tools 4250 +386 1597 +57
Online 625 +98 -494 +64
Business (Office) 5622 +401 3661 +196
Entertainment and devices 1963 +168 352 -34

These look like decent figures to me, though Microsoft’s broad-brush breakdown disguises trouble spots like the poor sales of Windows Phone 7. The online business, which includes Bing and ad sales, continues to bleed money, though slightly less than for the same quarter last year.

Microsoft says Bing-powered US search share (which includes Yahoo!) is now 27%, which is impressive, though I look at stats for and see Bing and Yahoo! at 4.7% combined, even though it has more visits from the USA than from any other region. Bing must have some area of strength that does not include technology blogs.

Currently the stars of the show are Server and tools, where Microsoft reports a sixth consecutive quarter of double-digit growth, and the Business division, where Microsoft reports strong growth for SharePoint, Lync and Exchange.

Microsoft also says that Office 365 has “strong adoption from small businesses to large enterprises”, though there are no exact figures. It does not surprise me me as it is an excellent product, misreported by some media who exaggerated the importance of Office Web Apps. Forget Office Web Apps: this is hosted Exchange and SharePoint, with web conferencing thrown in.

Entertainment and devices is mainly Xbox. My observation here is first, to note how well Microsoft has done to take Xbox to the top spot in the US console market, overtaking both the previous generation champion Sony and the once-unstoppable Nintendo Wii; and second, to note how small the profits are relative to the rest of the business. This may be slightly unfair, as I imagine some of those Xbox profits have been poured into Windows Phone investment.

Finally, I was amused by the Metro-style design of the accompanying PowerPoint slides:


One thought on “Microsoft financials: Server and Office business still growing”

  1. I wonder where Android license revenues would show up. E&D?

    The thing that surprised me the most was that even small businesses were buying Sharepoint + Lync. That’s incremental revenue that they could never have gotten in the packaged-software model. Those things are a hassle to administer.

    80% cross-sell! Even if that’s seat count and boosted by enterprises, Lync has so little penetration that this has to be very significant for that product.

    Maybe the subscription model really does work to boost sales, because customers don’t have to come up with the money up front.

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