Microsoft has recently announced record revenue and profits for second quarter 2014 managing to bring in $24.5 billion in revenue and $8 billion profit on the back of strong Xbox One and 360 sales with good growth from its commercial licensing divisions. Though the Windows are strong in the commercial business sector, the consumer sector still continues to envisage reduced demand resulting in revenue and profits. From the consumer point of view, Microsoft stays weaken and while the Xbox One and Xbox 360 sold 3.9 and 3.5 million units respectively, the gross margin for Devices & Consumer Hardware division came down from 46% to $0.4 billion.
The Total Surface revenue increased to $0.89 billion, selling around 1 million Surface tablets but the cost spiked to $0.93 billion due to marketing and slim margins on Surface tables.
Microsoft continues to mislead the actual number of Surface tablets sold though they have reported that revenue and units sold have increased in the last quarter but sadly so also the cost of selling the devices and Surface is still a loss maker for the second running year.
Microsoft in a fairly good footing
Microsoft’s commercial operation is doing well with Commercial Licensing – Window, SQL Server, Hyper-V, where revenue grew from 7% to $11 billion bringing in profits up 8% to $10 billion. Windows volume licensing also grew by 10% on the continued growth of Windows 7 with new commercial PC purchases. Besides this, the Cloud Services revenue was also up by 107% due to Office 365.
Microsoft can expect some revenue and profit growth from the sales of Xbox and if it operates well, this may be the year that Windows Phone and Surface bring in profit. Moreover, Nokia’s Devices & Services division which has plans to join Microsoft has also made an announcement on its quarterly earnings. It seems the outgoing CEO Steve Ballmer has left a fairly good footing for Microsoft and the company may not envisage breakout hits as in the case of Apple. It will also be in its favor if Microsoft creates something comparable to the iPhone or iPad and keep on bringing in more than $80 per year by way of revenue.