Strong Office and Kinect sales save Microsoft's quarter, Windows Phone 7 nowhere to be found

Microsoft's just-released quarterly earnings were boosted by long-time cash cow Office, and its innovative Kinect gaming system. Without them, earnings would have seemed anemic because of slow Windows 7 sales. As for Windows Phone 7, it's nowhere on the radar.

The company took in $19.95 billion for the quarter that ended Dec. 31, the most revenue it's ever had in a second quarter.

Leading the way was Office, which "had a huge quarter, exceeding everyone's expectations," according to Kevin Turner, Microsoft chief operating officer, in a statement released by Microsoft. As a result, revenue from the Microsoft Business Division revenue grew 24% compared to a year ago.

The Kinect was an even bigger success. Some 8 million units of it shipped in its first 60 days, compared to a projection of 5 million by Microsoft. As a result, revenue in Microsoft's Entertainment and Devices Division grew by 55% compared to a year ago.

Windows 7 sales were not spectacular, as expected, because shipments of PCs slowed, with worldwide PC shipments in the fourth quarter up an anemic 3.1 percent over the fourth quarter of 2009, according to Gartner.

Notable for its absence, though, was any significant information about Windows Phone 7, other than this in Microsoft's statement:

Windows Phone 7 launched during the quarter in 30 countries and on 60 operators and nine different devices. Microsoft announced developers are adding Windows Phone 7 applications to the marketplace at a rate of over 100 per day.

No mention was made in the statement about Windows Phone 7 sales, although yesterday, Microsoft said it had sold two million Windows Phone 7 devices to retailers in the quarter. That has to be a disappointment, because an anemic 500,000 were shipped during December, the height of the holiday shopping season. By way of contrast, Google activates 300,000 Android devices a day.

Microsoft also didn't break out any information about Windows Phone 7 financials. It's part of the company's entertainment and devices division.

Microsoft's Online Services Division, meanwhile, continued to struggle, losing $543 million in the quarter. Combined with sluggish sales of Windows Phone 7, that's clearly bad news, because online and mobile are where the greatest future growth will come.

Copyright © 2011 IDG Communications, Inc.

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