Windows 8 Isn’t Looking Like Microsoft’s Savior Yet

In its first earning report since key product launches, Microsoft’s results are just so-so.

Jessica Leberarchive page

January 24, 2013

Reporting record revenues of $22 billion, Microsoft painted a rosy picture today in its first earnings report to include sales related to its Windows 8 and Windows Phone 8 software, as well as its new Surface tablets.

These products launched in October and early November, and as PC sales slump, Microsoft is banking on them to gain ground in the all-important smartphone and tablet market, where the company is only a minor player today.

In Microsoft’s Windows division, sales were $5.8 billion, a 24 percent increase from the same period a year ago. Microsoft sold 60 million Windows 8 licenses to date, it said.

In general, these figures seem pretty good, but, as CNNMoney points out, fiscal quarters that included previous Windows launches were even bigger: After the Windows 7 launch, sales grew 76 percent, and after Windows Vista, sales grew 65 percent. That suggests businesses and individuals may be less enthusiastic than in the past about upgrading to Microsoft’s completely overhauled operating system that has a user interface optimized for touchscreen tablets and PCs. Though to be fair, overall new PC sales have also declined. Microsoft CFO Peter Klein said that 60 percent of business desktops worldwide run on Windows 7, however, so 60 million Windows 8 licenses doesn’t seem like that massive a number.

What could also potentially be a bad omen: In Microsoft’s Entertainment and Devices division, which includes Windows Phone 8, Surface, Skype and Xbox, revenue dropped by 11 percent compared to a year ago. Microsoft did not disclose how many Surface tablets it has sold. For phones that run on Windows software, manufacturers are selling four times more devices than a year ago, Microsoft said, but again, without knowing the baseline numbers, that could really mean anything. Executives empasized that these products are still in their early days.

Microsoft’s expenses grew by 10 percent, Klein said, mostly related to marketing spending for the new product launches. In San Francisco, at least, it’s been hard to walk a few blocks downtown without bumping into another Microsoft ad.