Microsoft Surprised Wall Street

[Atreides]

Software giant astonished the experts of Wall Street with its quarterly results which appeared to be much better than predicted. For a while, the financial experts have been forecasting that Microsoft’s bottom line would be only goodish. The observers have been trimming back profit targets for the company over the past 3 months.

However, Microsoft somehow turned in some rather good numbers well past average revenue predictions despite retiring CEO Steve Ballmer’s restructuring along with the pricy acquisition of Nokia’s handset business. The commercial side of Microsoft’s business appeared to have done better than expected. It posted a 10% increase in revenue, largely due to selling corporate Office and server software.

As for the consumer and hardware group’s revenue, it increased a more modest 4 percent, mainly because of the poor sales for Windows system as sales of PCs keep falling. Indeed, PC sales have been sliding for the last year and a half, though Microsoft Chief Financial Officer recently announced that there were signs of stabilization. In the meantime, sales of Windows software to PC makers, including HP, Lenovo and Dell, dropped 7% in the quarter.

Meanwhile, surface tablet sales rocketed to $400 million, mostly due to growing interest in the smaller, heavily discounted Surface RT model. This proves that the company should have made it cheaper in the first place.

Microsoft showed a 17% increase in profit to $5.2 billion, up from $4.5 billion during the same period in 2012. Revenue increased 16% to $18.5 billion, mostly thanks to rising sales of Microsoft’s Office software. Financial analysts had predicted $17.8 billion, on average.

Now, for the fiscal second quarter, which includes the crucial holiday shopping season, the software giant is predicting revenue of $23–$24 billion.