Businesses provided more of a boost for Microsoft than consumers in the fiscal year results announced yesterday, with sales of Microsoft Office and server software leading its revenue, followed nonetheless by the Xbox gaming related sales.
Consumer revenue around PCs declined 8 percent while business sales of PCs grew by 27 percent. Microsoft estimated that the worldwide PC market declined by 2 percent in the past 12 months, sullied by weak sales in developed markets.
Going forward, Microsoft is betting that a number of new technologies will provide significant revenue in the years to come. One is the Office365 service, which the company introduced in June.
"With Office365, we've created new market opportunities for Microsoft Office and our partners," Klein said. Office365 will help Microsoft "increase revenue and profit per seat," he said. "It gives us an opportunity to address the part of the workforce that does not regularly use a PC in the workforce."
Challenges and Contenders
Another bright spot seems to be Azure. Klein mentioned significant customers that use Microsoft's cloud service, including Boeing, Pixar and Toyota. He did not reveal revenue generated by Azure, though.
Klein was also confident that the pending acquisition of Skype will bear fruit. "With Skype, we will increase the acceptability of real-time voice and communication to both consumers and enterprises, generating new business and revenue opportunities for Microsoft," he said.
Microsoft executives also did not address the growing tablet market in relation to the softening PC market, other than to mention that, with Windows 8, "we are re-imagining Windows for a new generation of touch-centric hardware," according to Bill Koefoed, Microsoft general manager of investor relations.
The executives took some time to address the company's relations with Yahoo.
Earlier this week, Yahoo reported lackluster fiscal results in part because its partnership with Microsoft for ad sales brought in less money than expected. "During the quarter, we partnered closely with Yahoo to uncover and address several platform gaps and inefficiencies. We still face monetization challenges and will continue to work closely with Yahoo. We remain confident in the long-term potential of the combined search market," Klein said.
Business Division Growth
Microsoft Business Division's revenue for the fourth quarter grew by 16 percent for the year and 7 percent for the quarter, thanks to the recent launch of Microsoft Office 2010, which has already sold 100 million licenses. The division reported $5.8 billion in revenue for the fourth quarter and $22 billion for the full year, eclipsing revenue of Microsoft's flagship Windows and Windows Live Division, which oversees the Windows operating system.
"Customers are using Microsoft technology to virtualize their data center and build out private cloud environments," Koefoed said.
For the fiscal year ending June 30, Microsoft generated US$69.94 billion in revenue, an all-time high for the company and a 12 percent increase in revenue compared to fiscal 2010. Of this revenue, $23.15 billion was net income, a 23 percent increase from the prior year.
For the fourth quarter of fiscal 2011, Microsoft reported revenue of $17.37 billion, an 8 percent increase from the same period a year prior. Net income was $5.87 billion, a 30 percent increase.
Revenue Breakdown
Windows and Windows Live Division actually declined by 2 percent for the year, and 1 percent for the quarter, as demand for personal computers stagnated during this period of time. This division posted $4.74 billion in revenue for the fourth quarter and $19.02 billion for the year.
Revenue from Microsoft's Server and Tools division grew by 11 percent for the full year and 12 percent for the fourth quarter, as increased demand for Windows Server, System Center, and SQL Server continued unabated. Server and Tools reported $4.6 billion for the fourth quarter and $17 billion for the year.
For the fiscal year 2010 overall, the company reported revenue of $62.48 billion, and net income of $18.76 billion. That year, Microsoft recorded fourth quarter revenue of $16.04 billion and net income was $4.52 billion.
With these earnings, Microsoft bested analyst estimates across the board. Analysts expected the company to generate $17.23 billion in revenue for the quarter and $61.72 billion for the fiscal year, according to a poll by Thomson One Analytics. Net income was expected to come in at $4.9 billion for the fourth quarter and $22 billion for the year.
Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is Joab_Jackson@idg.com