Surface and Xbox One Hits With Buyers During the Holidays

By Kevin Parrish
published

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.

Kevin Parrish
23 Comments Comment from the forums
  • thdarkshadow
    Is there a number for PS4s sold? I am just curious how their sales compare
    Reply
  • JD88
    They failed to mention they spent more on the Surface than they took in. Surface division costed MS something like $940 million due to low margins and an extremely high advertising budget for a net loss of around $40 million.

    Those OEM Windows numbers are also troubling.
    Reply
  • back_by_demand
    They failed to mention they spent more on the Surface than they took in. Surface division costed MS something like $940 million due to low margins and an extremely high advertising budget for a net loss of around $40 million. Those OEM Windows numbers are also troubling.
    MS has big pockets and lots of patience, probably only IBM is better at playing the long game. Exactly the same could have been said with the outlay in the first couple of years of the original Xbox. If they keep getting serious market penetration they the advertising costs can basically be swept into the margins as it helps to advertise all their other products (OneDrive, Office, etc). I'm sure Apple were saying exactly the same thing about Android just before it exploded.
    Reply
  • damianrobertjones
    Heck... I'm rocking a Surface Pro 2 with the 512GB mSata drive. Sure, yeah, I should have waited for the 4300u CPU update but it looked far too sexy to pass. Nice machine
    Reply
  • stevejnb
    Ironically, I was going to chime in similarly to Back. At this rate, it will take them *far* less time to get returns on their tablet division than it took to get returns on the XBOX division - and that is now looked at as one of their most successful endeavours. Also, saying "well, it's been two years and still no profit!" is a very, very short sighted statement - did anyone really expect a break in to a saturated and competitive market in a large way without eating some losses for a few years?

    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.
    Reply
  • Sakkura
    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.
    The Bing advertisement revenue grew BY 34 percent, not TO 34 percent.
    Reply
  • bubbathaluva
    I'm sure we'll hear from Apple fanboys about how these numbers aren't a true indication of how well MS is doing. I'm sure PS4 fans will chime in with the same. Here's the reality.... XB & PS are still neck and neck with units sold over equal amount of days released. Both consoles are virtually the same as far as graphics and processing power. The only thing that sets either of the two apart are the software that runs them and more importantly how well the software integrates into the rest of your living room/entertainment hub/home theater. I've played with both companies consoles from their original versions. Microsoft creates the most seamless experience in terms of media sharing, game playing, tracking achievements and multiplayer games. Couple that with how well Windows 8.1 has finally made it easy for multiple PC's on the same network to share files, media, printers and other devices. Yes, Apple has been making it easy for years. MS has tried for years and it has been doable for a while, but not very easy or user-friendly. 8.1 has made it user-friendly and easy. I've used the base level Surface RT and for the money, it is an amazing piece of hardware. Once MS's phone OS is fully integrated into that seamless home network scheme, I'll very likely transition away from all Android. That's saying a lot considering how much I have loved my Android devices.
    Reply
  • Sakkura
    12552883 said:
    Here's the reality.... XB & PS are still neck and neck with units sold over equal amount of days released.
    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.
    Reply
  • bubbathaluva
    Sakkura, thank you for supporting my argument. Looks neck and neck to me. When the amount of units number in the millions and the distance between the two are in the thousands, that's what we mean by neck and neck. Give it another year and see if PS4 is still leading my .3 million units. Either way, lots of people are already trying to call PS4 the winner of a battle that really doesn't even exist. Both companies are trying to make money and both companies are making money.
    Reply
  • bubbathaluva
    By the way, here's some math for you...4.2 million x $400 = 1.68 billion3.9 million x $500 = 1.95 billionWho's winning this race again? Prices of the XB1 will most likely drop by next Christmas, thus eliminating the biggest advantage the PS4 had.
    Reply