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Microsoft Announces Record Revenues

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Microsoft Revenues

Despite Microsoft posting record revenues for the first quarter of its financial year, concerns still remain over the strength and future of Windows.

Revenues grew 11 per cent to $17.37 billion compared to the same period last year, however operating profit rose just one per cent to $7.2bn with the Windows, Server and Entertainment & Devices divisions all showed slower growth.

Like the previous quarter’s results, the Q1 results were boosted by Microsoft's Office business, with Office 2010 helping to drive revenues up by 7.7 per cent to $5.6bn and profits up 5.7 per cent to $3.7bn.

Although the Windows section of Microsoft's business grew (by 1.7 per cent to $4.87bn) this was below the two per cent growth seen in shipments of PCs for the last quarter according to Gartner and IDC. The reason for this is most likely down to a problem with piracy in China and the Far East which is where most of the growth in the PC business is happening at the moment.

Microsoft Revenues

Once again the Online Services division, including its Bing search engine, was a major drain on the company, posting a loss of just under $500m. However this is significantly down on losses of $560 last year and revenue for the last quarter actually grew by 18 per cent to $625m – which could suggest that it may have turned a corner.

Microsoft could be looking to bolster its online offerings by purchasing the beleaguered Yahoo! which posted further disappointing results earlier this week. However Microsoft could be facing competition from China’s Alibaba and AOL’s Tim Armstrong.

Previously, the Entertainment & Devices divison, which houses Xbox and Windows Phone products, had helped Office to bolster Microsoft’s revenues but this quarter it saw profits dive by 8.8 per cent despite revenues growing almost 10 per cent to $1.96bn.

With Windows 8 still a year away, analysts believe that Microsoft need to come up the next big problem to solve rather than coming up with the next version of an existing product. That could be key to Microsoft’s continued success, but it’s not an easy problem to solve.

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