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Microsoft posts record quarter but says tablets have “cannibalized” netbooks

Julie Bort | Oct. 21, 2011
Despite weak consumer demand for PCs, Microsoft posted a record first quarter revenue of $17.37 billion for the period that ended Sept. 30. This beat analysts expected sales of $17.2 billion. Revenue increased 7% percent over the year-ago period. Microsoft credited the increase to enterprise demand for Office, server and development tools.

Analysts say that about 91.8 million PCs total were shipped in the period. Windows PC sales to enterprises grew at about 5% while sales of PCs to consumers were flat, Microsoft says. Klein believes that the company is in the “middle innings” of Windows 7 adoption in the enterprise. Windows 7 now accounts for about 50% of all Windows users, according to Statcounter. Microsoft said that Windows 7 licenses have reached 450 million since its launch.

The perennial weak spot of Microsoft's Online Services Division remained so. The unit lost $494 million which was less money than it lost in the year-ago quarter, at $558 million. Microsoft says that Bing now owns 15% of the search market and this includes the boost it got from becoming Yahoo's search engine. Speculation that Microsoft will still buy Yahoo never seems to die, but Steve Ballmer recently went on record saying Microsoft was “lucky” that the deal fell through in 2008. 

Klein offered a little guidance, too. The first quarter has been traditionally Microsoft's weakest and the company expects its next quarter, which maps to the holiday season, to be another exceptional one, he said.


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