XBOX is the real star for Microsoft

Today Microsoft reported its annual earnings. And the no. is USD 70 bn (a growth of 12%). In an environment of slowdowns across the world this double digit growth for such a large company is encouraging for the software industry.

The real winner in the last year seems to be the XBOX 360 which has been breaking all records of device sales and earning revenue handsomely for MS. The STB division is lurking close to the Windows division in terms of revenue and may overtake them in an year or two. Read on for some more details.

These days large corporations tend to mint money not only from their core businesses but also from their treasury operations – hence I prefer to look at their operating income. In this area, MS again outshines with growth of 13% to USD 27.16 bn. This also reflects a healthy margin of 39% on the business (Whew!!)

So where did the growth come from?

MBD:  This division earns the max. revenues (22 bn) for the company and is home to Office, Exchange and Dynamics suite of products. Revenue increased 16% for the full year with Office 2010 selling over 100 million licenses.

Windows & Live: The second largest revenue earner for the company at (19 bn) the revenue for the full year decreased 2%. Windows 7 sold over 400 million licenses. This division suffered a negative growth of 5.7% in their operating income. Significant to note is that 75% of income here comes from OEMs. Sale of PCs to businesses grew approximately 11% this year and sales of PCs to consumers declined approximately 1%. The decline in consumer PC sales included an approximately 32% decline in the sales of netbooks.

STB: Home to Windows Server, Windows Server, Visual Studio, System Center, SQL Server and other enterprise products the division grew 11% for the full year with revenues of (17 bn).

EDD: The XBOX division made 8 bn and 45% for the full year on the momentum of XBOX console, Kinect, Windows Phone and Xbox Live.

OSD: Online Services Division (home of Search and Advertising) grew 15% for the full year and made revenue of 2.5bn and is the only loss making division in the MS portfolio. Compare this to Google that makes over 9 bn in a single quarter.

Pressure can be seen on Windows division primarily coming from the consumer angle (mainly netbooks being replaced by tablets). Let’s hope that Windows 8 currently shrouded in mystery is able to reverse this trend in favour of MS.

You can read the earnings press release online.


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