Microsoft Has the Last Laugh as Q1 Profits Surge

Microsoft must be feeling especially smug this morning after its latest quarterly earnings report showed strong growth in both sales and profits during the first three months of 2013.

Despite all the doom and gloom in recent weeks over the PC market’s continuing decline and the lukewarm reception of Windows 8, the software giant yesterday revealed revenues totaling $20.5 billion for Q1, up 18% from the first quarter of 2012. In line with this, Microsoft’s net profits also saw a sharp boost, rising by more than 17% to just over $6 billion.

Microsoft’s earnings, which far exceeded most analysts’ forecasts, are traditionally among the most closely watched, but never more so than now in the wake of last week’s report from IDC that global PC sales have fallen sharply since the beginning of the year.

Meanwhile Google and IBM also released their own earnings reports yesterday, with the former’s net profits climbing to $3.35 billion, a healthy 23% increase on the year before. However things were less rosy for IBM, which reported a slight fall in net profits and revenues, which it blamed on a failure to complete deals in time and the depreciation of the Japanese yen.

Microsoft Dying? No Chance!

 

Critics jumped all over Microsoft last week in the wake of IDC’s depressing report on global PC sales, blaming its much-derided Windows 8 OS as the main reason for the decline.  Report after report has suggested that consumers and businesses have been slow to transition to the new touch-optimized OS, yet the numbers suggest that these may be well off the mark.

Microsoft’s Windows Division raked in $5.7 billion in revenues for the first quarter, a 23% increase on the same period last year. However, the division’s year-on-year sales remained flat after an adjustment to its Windows Upgrade Offer.

But it isn’t just Windows that’s performing admirably. In fact, Microsoft saw growth across all of its main businesses.

“The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox Live, and Skype. While there is still work to do, we are optimistic that the bets we’ve made on Windows devices position us well for the long-term,” said CEO Steve Ballmer in a statement.

Best performer among these was Microsoft’s Entertainment and Devices Division, which saw revenues grow by 56%. Meanwhile, its Business Division saw 8% growth in profits, its Online Services Division was up 18%, Servers & Tools were up 11%, and Xbox Live membership grew by 18% to more than 46 million subscribers.

“Our diverse business continues to deliver solid financial results, even as we navigate the evolving device market. Looking ahead, we will continue to invest in long-term growth opportunities to drive our devices and services strategy forward and deliver ongoing value to shareholders,” said Peter Klein, Microsoft’s chief financial officer.

Google Profits Boosted by Online Ads Revenue

 

It wasn’t just Microsoft that had good news to share last night. Google reported similarly strong growth with its net business revenues soaring by 16% to $3.35 billion despite the trend towards cheaper ads on mobile devices.

Google’s profits benefited from a rise in income derived from online advertising, which helped grow its revenues to almost $14 billion for the quarter, up from $10.7 billion the year before.

“We had a very strong start to 2013, with $14bn (£9.1bn) in revenue, up 31% year-on-year,” said Google Chief Executive Larry Page.

Google’s results suggest that the company is beginning to build confidence with advertisers. It recently improved its cost-per-click, an important metric that dictates the price that advertisers must pay the search engine company, in a bid to make online ads more appealing.

About Mike Wheatley

Mike loves to talk about Big Data, the Internet of Things, Hacktivists and hacking, but he also hates Google and can never resist having a quick dig at them should the opportunity arise :) Got a REAL news story or tip? Email Mike@SiliconANGLE.com.