Microsoft Profits Up, Windows 8 Not the Reason

Last quarter Microsoft profits were up an impressive 19 per cent when compared to the same period last year.  However, the company can credit Office software and the Xbox 360, not Windows 8, for that bump.

While Microsoft's Windows division showed increases in revenue and profits, The Wall Street Journal notes this income was actually earned in the past, with its reporting deferred for accounting purposes.

This involved software that allowed the user to receive a free or reduced-price upgrade at a later date. Microsoft chose to not list the full revenue in its accounts at the time of purchase and instead held back a portion of the money to list as income when the upgrade was delivered. (Source; cnet.com)

'Windows 8 Effect' Hard To Detect

Taking this money out to allow a direct comparison, the Windows revenue was roughly the same in January to March 2013 as it was in 2012. For Microsoft's financial year-to-date (July 2012 to March 2013), Windows revenue is flat and profits have slightly fallen. (Source: wsj.com)

That's not a good sign given that Windows 8 was released last October. In Microsoft's defense it's worth noting that, in general, people are buying fewer PCs. But some critics suggest that Windows 8 has only aggravated this problem.

The overall revenue increase comes from other areas of business. Online services, most notably the Bing search engine, continue to be the only products and services where Microsoft actually loses money. However, those losses are steadily being reduced.

Xbox Console Among Most Profitable Microsoft Lines

Most of Microsoft's revenue came through two divisions, including Business, Server and Tools, and Entertainment. Those figures are largely driven by sales of Microsoft Office, corporate server software, and the Xbox console.

Given that Microsoft is on the verge of announcing a new Xbox console (tentatively known as the Xbox 720), it's impressive that the company continues to sell so many Xbox 360 units.

Overall, Microsoft is by no means doing badly: between January and March 2013 it made total profits of $6 billion, up from $5 billion last year. But the nature of its business is clearly changing, with Windows now accounting for less than half of total profits.