Announcing results for the third quarter of its 2010 financial year, Microsoft reported a 6 percent increase in year-over-year revenue, to $14.50 billion. Revenue from sales of Windows desktop editions jumped 28 percent, and revenue from Windows Embedded is on the rise too, according to the company.
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“Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox Live and our emerging cloud services, Peter Klein, Microsofts chief financial officer, wrote in an April 22 statement ahead of yesterday afternoon’s earnings call. “Our record third-quarter revenue along with continued rigor on cost management resulted in exceptional EPS growth.”
Windows revenue was up 28 percent compared with the same quarter a year earlier, driven by strong demand for Windows 7, according to Microsoft. More than 10 percent of all PCs worldwide are running Windows 7 today, making it “by far the fastest-selling operating system in history,” the company said.
When reporting results for the second quarter of the company’s financial year, Microsoft executives had complained that enterprise spending remained flat. Now, stated Keith Turner, the company’s chief operating officer, “Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong. We are also seeing tremendous interest in our market-leading cloud services for business.”
What about embedded … ?
Microsoft has five divisions: Windows & Windows Live, Business, Server and Tools, Online Services, and Entertainment and Devices (EDD). The last of these, EDD, is responsible not only for Microsoft’s embedded OSes — Windows Embedded Standard, Windows XP Embedded, Windows CE, and Windows Mobile, for example — but also for consumer products such as the Xbox 360 gaming console and Zune music player.
Microsoft EDD revenue for Q3 of FY2010
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Source: Microsoft
According to Microsoft, overall EDD revenues were up two percent year-over-year, going from $1.63 billion in Q3 FY2009 to $1.67 billion. Xbox 360 console sales, were down 13 percent year-over year, “in-line with overall market decline,” according to the company, which added that “software attach” continued to be the industry’s best, at 8.8 percent.
For what appears to be the first time in several years, Microsoft also hailed the “non-gaming revenue” of EDD, noting that this was up 14 percent year-over-year. Bill Koefeod, the company’s general manager for investor relations, said this reflected “growth in the PC hardware market and increased Windows Embedded revenue.”
Koefoed added, “We continued to have good momentum on the product side for mobile. During the quarter we announced Windows Phone 7 and last week we announced Kin, which will be available in the U.S. in May.”
Set for release during the fourth quarter of the 2010 calendar year, Windows Phone 7 will have little impact on Microsoft’s financials for the next quarter. Given that the fourth quarter of Redmond’s 2010 fiscal year ends in June, the Kin devices are not likely to make a significant difference either.
But Chief Financial Officer Peter Klein said he expects EDD to have a “fairly robust growth rate for the fourth quarter, driven by the uplift from the strong PC market, increased gaming attach revenue, and momentum in Windows Embedded.” Full-year revenue for EDD should be roughly flat compared to the prior year, he predicted.
Meantime, desktop editions of Windows, such as Windows 7, the outgoing Windows Vista, and Windows XP are all part of Microsoft’s Windows & Windows Live division (formerly known as the Client division). Here, consumer Windows 7 sales brought year-over-year revenue up 28 percent, to $4.42 billion.
Microsoft Windows & Windows Live revenue for Q3 of FY2010
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Source: Microsoft
According to Microsoft, the PC market grew 25 to 27 percent year over year, and OEM revenue for Windows licenses grew even further, at 29 percent. “The business PC refresh has restarted,” the company added, noting that while sales of computers to enterprises were essentially flat last quarter, they’re now up by more than 14 percent.
