The world's largest software company did not say anything about its
five-month search for a new chief executive to replace Steve
Ballmer, who said in August he would retire within a year.
The company co-founded by Bill Gates 39 years ago was central to the
personal computer revolution, and its Windows and Office products
still dominate business desktops, but it lost its way with consumers
in the last decade under Ballmer as Apple Inc and Google Inc stormed
ahead in mobile computing.
The quarter may well be the last full one for Ballmer, and it at
least showed some positive momentum for the Surface tablet,
Microsoft's long-delayed attempt to knock Apple's iPad off its
"It's a good print to ride off into the sunset with, for the current
CEO," said Colin Gillis, an analyst at BGC Financial. "There's still
the over-arching question for this company: who's going to be the
new CEO, and what direction they take."
Sources have said the search is down to a handful of candidates,
including internal and external executives.
XBOX, SURFACE RISE
Microsoft's new Xbox One console, launched in November, helped the
top line, contributing more than half to the 7.4 million unit sales
in the quarter, up from 5.9 million a year ago. That said, Sony's
cheaper PlayStation 4 appears to be winning the latest video game
Sales of the second generation of Surface tablets jumped to $893
million in the key holiday shopping quarter, more than the whole of
the previous fiscal year. But making and selling the machines cost
$932 million, meaning Microsoft is not making a profit on them.
At prices ranging from $450 to $1,800, the sales figure suggests
Microsoft sold no more than 2 million Surface units. By comparison,
Apple is expected to announce sales of more than 20 million iPads
for the holiday quarter next week.
"Xbox is definitely a feather in Microsoft's cap; they defied the
skeptics," said Daniel Ives, an analyst at FBR Capital Markets. "But
Surface continues to be the Mount Everest of uphill battles."
Microsoft did not say much about Windows Phones, its other great
push into the mobile computing arena, which will gain force when it
completes a $7.2 billion acquisition of Nokia's handset business in
the next few weeks.
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The company said overall phone revenues, which include license fees
from Nokia and royalty payments from other handset makers using
Google's Android system, jumped 50 percent to just over $1 billion
in the quarter.
However, that increase mostly reflects a low starting base for
Windows in the year-ago quarter and runaway sales of Android
Worryingly for Microsoft, Nokia earlier in the day announced sales
of only 8.2 million Lumia smartphones, which was almost double the
same quarter a year ago, but down from the 8.8 million it sold in
the previous quarter, suggesting that the new phones lost momentum
in the crucial holiday season.
Overall, Microsoft reported a fiscal second-quarter profit of $6.56
billion, or 78 cents per share, compared with $6.38 billion, or 76
cents per share, in the year-ago quarter.
That easily beat Wall Street's average estimate of 68 cents,
according to Thomson Reuters I/B/E/S, lifting Microsoft shares 3.4
percent in after hours trading.
Overall revenue rose 14 percent to $24.5 billion, also beating Wall
Street's forecast of $23.7 billion, helped by higher sales of
Microsoft's perennially strong business offerings, including server
software, the Office suite of applications and quickly growing
'cloud,' or Internet-based, computing services.
Over the last few months analysts slightly raised revenue estimates,
but reduced them for net income.
(Additional reporting by Edwin Chan in
San Francisco, and Ritsuko Ando and Jussi Rosendahl in Helsinki;
editing by Richard Chang)
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