Even though PC shipments were down 14% last quarter, Microsoft's Windows division yesterday posted revenue about the same as the last year, making up for slumping sales to OEMs with impressive growth in long-term licensing agreements sold to enterprises.
But for the second quarter in a row, Microsoft said nothing about Windows 8 sales, leaving analysts to question whether the company can sustain sales of its operating system without a rapid turnaround in tablets.
The lack of any number -- the last time Microsoft touted Windows 8 licenses sold was in early January, when it said it had dealt out 60 million -- wasn't surprising to some.
"They'll wait until the end of the fiscal year to show a more impressive number," said Wes Miller, an analyst with Directions on Microsoft, in a Thursday interview. "And they'll do that again in October, on the anniversary of Windows 8's launch."
When Microsoft has highlighted Windows 8 sales before, it said they were roughly in line with Windows 7 at the same point in its sales cycle. The lack of any recent trumpeting of sales suggests that Windows 8 sales now lag behind those of Windows 7 two quarters after its release.
That supposition is matched by recent data, which shows that Windows 8's usage share badly lags behind Windows 7's at the same point after its debut in 2009.
During the first quarter, the Windows group recorded revenue of $5.7 billion, or 23% above the same three-month span in 2012. But because $1.1 billion of that was simply shuffled from last year -- deferred from the sales of Windows 7 under a free Windows 8 upgrade program -- the adjusted revenue of $4.6 billion was the same as last year.
Windows accounted for 28% of the company's total revenue of $20.5 billion for the quarter, slightly above 2012's fourth-quarter contribution. Microsoft's Business division, the part of the firm responsible for Office, was the largest supplier, however, with a 31% share of all revenue.
Microsoft acknowledged that Windows sales had been hit by the slump in PC sales, which IDC last week estimated had contracted by 14% from the year prior. "OEM revenue performance was in line with the underlying x86 PC market, which continues to be challenged as the PC market evolves beyond the traditional PC to touch and mobile devices," Chris Suh, who heads Microsoft's investor relations, said in a conference call with Wall Street analysts yesterday.
That Windows managed to remain flat in the face of the drastic fall-off in PC sales -- IDC said the quarter's decline was the largest in nearly 20 years -- was impressive.
Microsoft made up for the slack in Windows sales to OEMs (original equipment manufacturers) such as Hewlett-Packard, Lenovo and Dell by boosting sales to enterprises.
Windows's volume license agreement revenue was up double digits, Suh said, and on track to bring in $4 billion in the fiscal year, which ends June 30. Three-quarters of all enterprise agreements -- the most comprehensive and expensive plans sold to businesses -- included Windows, he added.
"If that's true it means companies either have confidence in Windows over the next three years, or Microsoft is heavily discounting those agreements," said Rob Helm, a colleague of Miller at Directions on Microsoft.