As far as Microsoft is concerned, the PC can die another day.
Microsoft rumbled to record sales in its last quarter with its Windows and Office franchises performing like faithful old friends. About 175 million licenses of Window 7 have been sold since the product was released last year, making it the fastest selling version of Windows. In addition, both consumers and corporations have increased their purchases of Microsoft's software, reflecting that a significant PC upgrade cycle has taken hold.
"They're doing well across the board," said Sasa Zorovic, an analyst with Janney Montgomery Scott.
Earlier in the week, Apple posted quarterly revenue of $15.7 billion, as sales of its phones, music players and computers continue to skyrocket. The company has almost doubled its revenue in the last two years. Wall Street analysts wondered if Apple's total might be too high for Microsoft to match, marking a symbolic changing of the guards from a PC-driven to gadget-driven computing culture and a new chapter in the two companies' tumultuous history.
Microsoft rumbled to record sales in its last quarter with its Windows and Office franchises performing like faithful old friends. About 175 million licenses of Window 7 have been sold since the product was released last year, making it the fastest selling version of Windows. In addition, both consumers and corporations have increased their purchases of Microsoft's software, reflecting that a significant PC upgrade cycle has taken hold.
"They're doing well across the board," said Sasa Zorovic, an analyst with Janney Montgomery Scott.
Earlier in the week, Apple posted quarterly revenue of $15.7 billion, as sales of its phones, music players and computers continue to skyrocket. The company has almost doubled its revenue in the last two years. Wall Street analysts wondered if Apple's total might be too high for Microsoft to match, marking a symbolic changing of the guards from a PC-driven to gadget-driven computing culture and a new chapter in the two companies' tumultuous history.
But not so fast.
Microsoft's revenue total of $16.04 billion surpassed the $15.27 billion predicted by analysts surveyed by Thomson Reuters and arrived on 22 percent sales growth.
In addition, Microsoft posted a 48 percent rise in net income to $4.52 billion, or 51 cents a share, from the $3.05 billion, or 34 cents a share in the comparable period last year. Analysts had expected earnings of 46 cents a share.
For the full year, Microsoft reported a 29 percent rise in net income to $18.76 billion and a 7 percent rise in revenue to $62.48 billion.
All told, Microsoft's sales achieved a company record and reflected a healthy technology industry that has benefited from a recent increase in corporate spending.
"We are encouraged by the resurgence of business PC shipments," said Peter Klein, the chief financial officer at Microsoft, during remarks to Wall Street analysts.
But the positive results from the corporate market were not matched by the results from Microsoft's search, entertainment and mobile technologies.
Microsoft's sales of Windows rose to $4.55 billion from $3.17 billion in the comparable period last year, while sales of Office and other business products rose to $5.25 billion from $4.57 billion.
"Consumers are even buying Office when they're refreshing their PCs," said Katherine Egbert, an analyst with Jefferies & Company.
The comments about PC upgrades reaffirmed the optimism that executives from other technology companies have expressed in recent weeks.
For example, Intel, the world's largest chip maker, recorded the highest revenue in company history earlier this month. Executives from Intel and Microsoft said they expect the PC upgrades to continue over the next year.
In addition, both companies have benefited from improved interest in their higher-profit data center products. This again points to a situation in which large companies have moved to upgrade their infrastructures.
The PC aside, Microsoft continues to face a stream of criticism around its efforts in search, devices and entertainment.
During the fourth quarter, Microsoft's online services group lost $696 million, while its entertainment and devices group lost $172 million. The online group includes the Bing search engine, which competes with Google, while the Xbox game console and mobile phone products fit into the entertainment and devices segment.
"Everyone thinks they will spend a lot of money to become relevant in search, and that is exactly what they are doing," said Ms. Egbert. "I don't think anyone buys the stock because of Bing."
In an embarrassing turn, Microsoft just scrapped its Kin smartphone line, which had been under development for almost two years. The company sold fewer than 10,000 of the devices, which were meant to attract a younger crop of customers with flashy social networking software.
And, while the Xbox is a success story from a customer satisfaction and innovation point of view, it does little to lift Microsoft's bottom line, Mr. Zorovic said.
Microsoft's consumer blunders have been intensified in the public eye by Apple's success with the iPhone and by Apple's soaring share price.
Steven A. Ballmer, Microsoft's chief executive, has come under heavy criticism in recent weeks for Microsoft's stumbles.
"The hardest thing for Microsoft is not coming up with the right products but rather coming up with the right business models," said Mary-Jo Foley, the editor of the All About Microsoft blog. "The way people get money from business software and consumer software is just a lot different now."
Mr. Ballmer has done what Wall Street has asked by going through a round of layoffs and cost-cutting, Ms. Foley said.
"Is firing Steve Ballmer going to magically lift the share price?" Ms. Foley said. "I don't think it is, and I don't know who this magic person is that people see coming in to fix things."
Shares of Microsoft rose 72 cents, or 2.87 percent, during regular trading on Thursday to $25.84. In after-hours trading, after the release of the quarter's results, shares of Microsoft dropped 0.58 percent to $25.69.
Microsoft's revenue total of $16.04 billion surpassed the $15.27 billion predicted by analysts surveyed by Thomson Reuters and arrived on 22 percent sales growth.
In addition, Microsoft posted a 48 percent rise in net income to $4.52 billion, or 51 cents a share, from the $3.05 billion, or 34 cents a share in the comparable period last year. Analysts had expected earnings of 46 cents a share.
For the full year, Microsoft reported a 29 percent rise in net income to $18.76 billion and a 7 percent rise in revenue to $62.48 billion.
All told, Microsoft's sales achieved a company record and reflected a healthy technology industry that has benefited from a recent increase in corporate spending.
"We are encouraged by the resurgence of business PC shipments," said Peter Klein, the chief financial officer at Microsoft, during remarks to Wall Street analysts.
But the positive results from the corporate market were not matched by the results from Microsoft's search, entertainment and mobile technologies.
Microsoft's sales of Windows rose to $4.55 billion from $3.17 billion in the comparable period last year, while sales of Office and other business products rose to $5.25 billion from $4.57 billion.
"Consumers are even buying Office when they're refreshing their PCs," said Katherine Egbert, an analyst with Jefferies & Company.
The comments about PC upgrades reaffirmed the optimism that executives from other technology companies have expressed in recent weeks.
For example, Intel, the world's largest chip maker, recorded the highest revenue in company history earlier this month. Executives from Intel and Microsoft said they expect the PC upgrades to continue over the next year.
In addition, both companies have benefited from improved interest in their higher-profit data center products. This again points to a situation in which large companies have moved to upgrade their infrastructures.
The PC aside, Microsoft continues to face a stream of criticism around its efforts in search, devices and entertainment.
During the fourth quarter, Microsoft's online services group lost $696 million, while its entertainment and devices group lost $172 million. The online group includes the Bing search engine, which competes with Google, while the Xbox game console and mobile phone products fit into the entertainment and devices segment.
"Everyone thinks they will spend a lot of money to become relevant in search, and that is exactly what they are doing," said Ms. Egbert. "I don't think anyone buys the stock because of Bing."
In an embarrassing turn, Microsoft just scrapped its Kin smartphone line, which had been under development for almost two years. The company sold fewer than 10,000 of the devices, which were meant to attract a younger crop of customers with flashy social networking software.
And, while the Xbox is a success story from a customer satisfaction and innovation point of view, it does little to lift Microsoft's bottom line, Mr. Zorovic said.
Microsoft's consumer blunders have been intensified in the public eye by Apple's success with the iPhone and by Apple's soaring share price.
Steven A. Ballmer, Microsoft's chief executive, has come under heavy criticism in recent weeks for Microsoft's stumbles.
"The hardest thing for Microsoft is not coming up with the right products but rather coming up with the right business models," said Mary-Jo Foley, the editor of the All About Microsoft blog. "The way people get money from business software and consumer software is just a lot different now."
Mr. Ballmer has done what Wall Street has asked by going through a round of layoffs and cost-cutting, Ms. Foley said.
"Is firing Steve Ballmer going to magically lift the share price?" Ms. Foley said. "I don't think it is, and I don't know who this magic person is that people see coming in to fix things."
Shares of Microsoft rose 72 cents, or 2.87 percent, during regular trading on Thursday to $25.84. In after-hours trading, after the release of the quarter's results, shares of Microsoft dropped 0.58 percent to $25.69.
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