Microsoft is once again relying on sales of its Office software and its Xbox console to plug the hole left by large losses from its online division.
While Microsoft’s record Q4 earnings exceeded analysts' expectations, the Redmond company will be worried that once again its online division posted a loss, this time of $728 million. Overall the figures look healthy, with Microsoft reporting revenues of $17.4 billion and profits of $6.2 billion, up 8 per cent and 4 per cent respectively, compared with the same period last year.
Microsoft Office 2010 continues to sell well having sold over 100 million licences in total. Its continued success helped Microsoft’s Business Division to grow by seven per cent in the last quarter. However the Windows and Windows Live Division saw a drop of one per cent for the quarter despite strong PC sales generally, which were up two percent globally in the same quarter. This is sure to worry investors if it's a trend that continues for the rest of the year,
The continued success of the Xbox and Kinect motion sensor helped boost revenue from the Entertainment and Devices Division by 30 per cent for the quarter and a huge 45 per cent growth for the year as a whole.
The Online Services Division, which includes the company's new cloud offerings recorded revenue growth for the fourth quarter of 17 per cent, yet despite this growth it continues to record a loss. It lost $728 million on revenues of just $662 million – compared to $688 million losses on revenues of $568 million a year ago. The failure of Bing to significantly grow its market share and the cost of signing up new search partners – such as Baidu – mean that Microsoft’s online offerings could be some way from paying for themselves.