Microsoft Posts Record Revenue — but Xbox Is Slipping

Microsoft reported record revenues of $17.41 billion for the past quarter, but profits slipped 2.4% from the same period a year earlier, down from $5.23 billion to $5.11 billion.

PC sales were sluggish due to the twin pressures of a hard-disk shortage brought on by flooding in parts of Asia and the ongoing shift from traditional computers to mobile devices such as tablets.

Microsoft’s tablet strategy won’t be fully realized until the fall, when Windows tablets are expected to debut alongside the company’s new PC operating system, Windows 8.

Microsoft also took a hit in its Xbox division, with revenues dropping 16%, which Microsoft blames on a soft game console market. Nonetheless, the company remains upbeat about the Xbox platform, pointing out it’s currently the market leader, and has been for more than a year.

“We’ve really staked out a unique value proposition,” said Microsoft CFO Peter Klein on an earnings call. “We view Xbox Live as a persistent long-term revenue stream. We feel great about out leadership position.”

The good news was from the company’s business-oriented products, like Office 365, Lync and Sharepoint, and there was double-digit revenue growth in those areas. Microsoft attributes its growing strength in the enterprise market to its unique offerings, particularly with cloud services.

SEE ALSO: Microsoft Reveals Its Plan to Sell Windows 8 “Businesses are investing in data centers and desktops because the see technology as a way to cut costs and improve their strategic positioning,” said Klein.

“I think investors sometimes put companies in a box and say you’re either in private cloud or public cloud, and we’re in both,” added Bill Koefoed, Microsoft’s general manager of investor relations.

“We’re really the only company that’s got that breadth of offerings. We’ve kind of coined this term ‘hybrid IT,’ where you can use both to manage your IT infrastructure.”

Microsoft said it was also trying to bring its growing Windows Phone platform to more people, particularly with the recent high-profile launches of the Nokia Lumia 900 and HTC Titan II.

In the past three months, the number of apps in the Windows Phone Marketplace has doubled, Microsoft said — though it didn’t give a total number.

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