Surface and Xbox One Hits With Buyers During the Holidays
Microsoft sold a lot of consoles and Surface tablets in the last quarter.
Microsoft reported better-than-expected results for its fiscal second quarter ending December 31, 2013. The company stated that it pulled in $6.56 billion, up from the $6.38 billion the company made in the same quarter last year. Revenue was also $24.52 billion, up 14 percent year over year.
"Our Commercial segment continues to outpace the overall market, and our Devices and Consumer segment had a great holiday quarter," said Microsoft CEO Steve Ballmer. "The investments we are making in devices and services that deliver high-value experiences to our customers, and the work we are doing with our partners, are driving strong results and positioning us well for long-term growth."
According to the financial report, Surface revenue more than doubled sequentially, from $400 million in the first quarter to $893 million in the second quarter. The Xbox business was rather kind to Microsoft as well, with 3.9 million Xbox One consoles sold and 3.5 million Xbox 360 consoles sold.
Check out what we thought of the Xbox One in our review here.
Microsoft reported that its Windows OEM revenue declined 3 percent (consumer), reflecting a strong 12 percent growth in Windows OEM Pro revenue (enterprise), offset by continued softness in the consumer PC market. Unfortunately, the company didn't reveal which sold better, Windows 7 or Windows 8.
Bing also saw growth, taking 18.2 percent of the search market and the revenue stemming from Bing advertisements growing to 34 percent. Overall, the Devices and Consumer revenue grew 13 percent to $11.91 billion.
"We delivered record revenue as demand for our business offerings remains high and we made strong progress in our Devices and Consumer segment," said Amy Hood, chief financial officer at Microsoft. "These results reflect our focus on execution, cost discipline, and long-term shareholder value as we continue to drive the strategic transformation of the company."
On a commercial level, revenue grew 10 percent to $12.67 billion. Office 365 commercial seats and Azure customers both grew triple-digits, and commercial cloud services revenue more than doubled.

Those OEM Windows numbers are also troubling.
I wouldn't even call OEM numbers troubling so much as expected. Precisely that general trend is what moved them towards becoming a "devices and services" company, and the future likelihood of web OS's being a major thing - something you have pointed out yourself many times JDS - makes this, again, quite expected. MS is battening down the hatches and changing course to compensate for this already noticeable trend... We'll see if it works long term. As it stands, this is a good sign their Surface line is headed in the right direction - though I personally think that, while it's a good product, it is generally overpriced.
The Bing advertisement revenue grew BY 34 percent, not TO 34 percent.
PS4 had sold 4.2 million units as of December 28, 2013. Xbox One had sold 3.9 million units as of January 23, 2014. That's 95k PS4 sales per day and 62k Xbox One sales per day.
The distance is in the tens of thousands PER DAY. At that rate, after a single year the difference would be 12 million units. Most likely will be less because sales of both consoles will slow down, but still - the PS4 has outsold the Xbox One 3:2 so far.
I wouldn't even call OEM numbers troubling so much as expected. Precisely that general trend is what moved them towards becoming a "devices and services" company, and the future likelihood of web OS's being a major thing - something you have pointed out yourself many times JDS - makes this, again, quite expected. MS is battening down the hatches and changing course to compensate for this already noticeable trend... We'll see if it works long term. As it stands, this is a good sign their Surface line is headed in the right direction - though I personally think that, while it's a good product, it is generally overpriced.
I agree for the most part. I really think the Surface could do a lot better if it had full Win 8 on it, but that's rehashing an old argument.
I was in Best Buy the other day looking at computers in all forms with my Fiance. She needs a Windows machine to use ONE obscure legacy program for a class. She liked some things about the Surface, but it was out immediately due to lack of x86 compatibility. She likes to use her PC on her lap in bed so the keyboard and stand design were also not great. I still think a clam-shell type docking setup is a lot more functional.
The build quality on the thing was actually pretty good though. A bit bulky when compared to something like the iPad Air, but it felt sturdy. Much better than the Asus T100 which we will probably end up getting. Where I think the Surface is overpriced is the keyboard. An extra $80-100 is frankly nuts. If it included one cover of your choice at the $450 price point it might not be so bad. At $450 with the keyboard, this thing could be cross shopped with the Air. At $550 with keyboard dock, it's really not a good value. Someone could buy a Chromebook, Nexus 7, and Moto G for that.
I'm not crazy about the T100, but it seemed to get the job done at a decent price. Plus the design of it makes sense.
The Xbox division is still barely profitable 10 years later. It certainly is a long game. In fact, last time I checked Microsoft was making more money off Android licensing fees than it was the Xbox division on average. Microsoft isn't going away anytime soon, but its days of dominating consumer PCs are over. It will continue to thrive in the business world though as long as its next operating system doesn't alienate the business market like 8 has. They got off pretty easy this time as most businesses had just upgraded to 7 and didn't need to get 8. With 9, businesses will be looking for an upgrade and not one that puts a tablet OS in front of their employees.
And you REALLY believe that, huh? Clearly you have never dealt with streaming games and tried to play online with players who all have different ISP speeds. And I assume you are referring to that same "ONLIVE" that was originally forecast to be worth nearly $2 billion (US) two years ago and sold for just a few million after laying everyone off. Oh and good luck with streaming true 1080p-developed games, let alone in the future 4K games where the next major revolution will occur with consoles (yes, you can bank on the fact that the "big three" are already working on their next generation consoles).
No. Microsoft is fine. At least for the next 5 years or so. Anyone saying they are dead is living in a fantasy world. My only point is that I think they missed a big opportunity with the Surface. I really think it could have been a hit had it been priced right and were running the correct OS. Then again, they are taking a loss on each one. My guess is a lot of that is due to advertising expenses and not manufacturing cost.
The Surface Pro is the device to look at there, and it is AFAIK doing better than the Surface not-Pro. IMO what they did wrong was split the Surface brand between two very different devices. The criticism of the Surface not-Pro rubbed off on the much better Surface Pro.