Microsoft Profits Fall in Second Quarter But Dynamics Revenue Climbs

Microsoft today announced quarterly revenue of $21.46 billion for the quarter ended December 31, 2012. Earnings dropped by two cents per share compared to the same quarter in 2011, from $0.78 per share to $0.76 while revenue climbed by $1.1 billion.

Wall Street had expected 75 cents per share, on average, according to Thomson Reuters I/B/E/S.

For the three months ended December 31, 2012, compared with the same three months in 2011, Microsoft Business Division (MBD) revenue decreased, mainly due to lower revenue in the division.  But the Microsoft Dynamics product line, which is a part of MBD, saw a 12% increase in revenue, according to SEC filings. Dynamics saw an 11% revenue increase over the last six months compared to the same period in 2011. 

For the most recent quarter, the overall decrease in MBD revenue was due mainly to the deferral of $689 million of revenue related to the Office Upgrade Offer and $99 million of revenue related to Office Pre-Sales. This decrease was offset in part by overall increased sales of the Microsoft Office system. Business revenue increased $196 million or 4%, primarily reflecting growth in multi-year volume licensing revenue. Consumer revenue decreased $815 million or 67%, driven primarily by the Office Deferral.

Early response to the earnings report puts the blame for the lackluster results on the lack of excitement in Windows 8, which was released in October 2012 but has failed to generate the type sales that might propel significant growth.

The Server & Tools business reported $5.19 billion of revenue, a 9% increase from the prior year period, driven by double-digit percentage revenue growth in SQL Server and System Center.

The Online Services Division reported revenue of $869 million, an 11% increase from the prior year period. Online advertising revenue grew 15% driven by an increase in revenue per search.

The Entertainment and Devices Division posted revenue of $3.77 billion, a decrease of 11% from the prior year period. Adjusting for the Video Game Deferral, the division's non-GAAP revenue decreased 2% for the second quarter. Xbox continues to be the top-selling console in the United States. During the quarter, Microsoft launched Windows Phone 8 with a broad array of carriers and devices.

About Jason Gumpert

As the editor of, Jason oversees all editorial content on the site and at our events, as well as providing site management and strategy. He can be reached at

Prior to co-founding, Jason was a Principal Software Consultant at Parametric Technology Corporation (PTC), where he implemented solutions, trained customers, managed software development, and spent some time in the pre-sales engineering organization. Jason has also held consulting positions at CSC Consulting and Monitor Group.

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