Microsoft came in with its earnings report for the quarter ended December 31, 2011, and it shows record revenue of $20.9 billion., which was a 5% increase over the same period last year. Net income was $6.62 billion, and earnings per share were $0.78, beating out Wall Street estimates. The results were buoyed by the Entertainment & Device division, which had a 15% growth for the quarter despite December's weak sales overall for the industry. The operating income for the Entertainment Group fell 20%, though, to $528 million, which was attributed to increased royalty costs.
Microsoft stated that the Xbox 360 installed base is now approaching 66 million consoles worldwide, with 18 million Kinect sensors. The Xbox Live service has 40 million members worldwide, which is up 33% from the year-ago period.
The Windows division slumped due to lower PC shipments, partly a result of the Thailand flooding which has led to a shortage of hard drives. Microsoft expects results for this quarter to continue to be below expectations due to the PC sales situation, which was already hurt by the growth in iPad sales (which now outpaces desktop PC sales).
Microsoft CFO Peter Klein said he expects the console business to be “softer than we previously expected” for this quarter. Overall, 8.2 million Xbox 360 console sales were sold in the holiday period, a 25% increase from a year ago, even though sales were slower than expected in December. Microsoft's gains came largely by taking market share from the Wii and the PS3, as overall console sales were down in that period.
This has led to larger-than-expected Xbox inventories for retailers, which is why sales are expected to be slower this quarter. Klein expects revenue to for the Entertainment & Device division to grow in the “high single digits” for the current quarter (the third quarter of Microsoft's fiscal year) and in the “mid-teens” for the entire fiscal year.
The results show that Microsoft is continuing to lead the console manufacturers and enjoy solid sales results, but overall the company's performance pales in comparison to Apple's $46.3 billion in revenue for the same quarter (more than double Microsoft's revenue) and profit more than double Microsoft's. Still, it beats the heck out of Nintendo's performance.
