Microsoft's Windows Sales Decline, Business Division Grows

Microsoft offered strong quarterly results, but one of its revenue pillars -- the long-running Windows franchise -- experienced a slight decline.

The company reported revenue of $17.37 billion for its fiscal fourth quarter ended June 2011, an 8 percent increase from the year-ago quarter. Quarterly operating income, net income and diluted earnings per share were $6.17 billion, $5.87 billion and $0.69 per share, all of which represented increases. Overall, the company reported revenue of $69.94 billion for the fiscal year.

As expected by many analysts heading into the reporting period, Microsoft s revenue came on the back of its flagship software products. Microsoft Business Division revenue grew 16 percent during the quarter, driven by sales of Office 2010, while Server and Tools revenue grew 12 percent, driven by products such as Windows Server.

Both the Online Services Division and the Entertainment & Devices Division reported gains. In the latter case, the hands-free Xbox Kinect game controller has proven a bestseller and something of a life-extender for the aging console. Microsoft also emphasized its relationships with Facebook and Yahoo, both of which are being leveraged to increase market share for the company s Bing search engine.

Windows 7 continued to perform strongly, selling some 400 million licenses, although Windows and Windows Live Division revenue declined 1 percent in the fourth quarter. During the July 21 earnings call, Microsoft executives attributed this dip to softening PC sales.  

A handful of times this quarter, the company showed off early work on the next version of Windows, which it has internally code-named Windows 8. In place of the traditional desktop and taskbar, Windows 8 relies on color tiles designed to be equally tablet- and PC-friendly.

Microsoft also used this quarter to further drive its all-in cloud strategy. "We're moving forward to the cloud, public and private," CEO Steve Ballmer told those assembled to hear his July 11 keynote speech at the Worldwide Partner Conference. "We're all in, and we want partners who are all in with us."

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