Microsoft's earnings release is out, and it looks good but not spectacular: revenue of $16.43 billion is ahead of expectations, while earnings are quite a bit better at $0.61.

Investors were expecting a blowout, and have sent the stock down about 2% after hours.

Windows sales were down about 4% -- in line with a PC unit sales drop of more than 3% -- but the Business Division (Office) continued to show the spectacular growth it's seen in the last two quarters, rising almost 21%. That's thanks mainly to the release of Office 2010 and related products last spring.

Kinect continued to do great things for the Xbox -- Entertainment & Devices revenue was up 60% from last year to $1.94B. But margins are still a lot slimmer here than in the company's core businesses -- operating income was only $225 million.

The Online business continues to be a dog -- once again, the division's operating LOSS (-$726m) was greater than its REVENUE ($648m). But the losses continue to be relatively affordable when the rest of the company is doing OK.

The company's cash hoard continues to grow -- it's now over $50 billion. That's up from $41 billion last quarter.

Here's the overview:

Revenue: $16.43B (+13%) vs $16.19B consensus

EPS: $0.61 vs $0.56 consensus.

Windows: Revenue $4.45B (-4% -- about in line with PC sales), operating income $2.76B

Business (mostly Office+Exchange+SharePoint): Revenue $5.25B (+24%), op income $4.31B

Server & Tools: Revenue $4.10B (+11%), op income $1.15B

Entertainment & Devices (Xbox+mobile): Revenue $1.94B (+60% -- Kinect!), op income $225m

Online: Revenue $648m (+14%), operating LOSS of $-726 million.

CASH and short-term investments: $50.15 billion.

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Here's our preview from earlier:

PC market statistics have been mixed for the quarter. Research firm IDC saw global PC unit shipments dip 3.2% from last year -- it had previously expected modest growth of 1.5% -- and big PC sellers like Acer and HP have both shown weakness in PC sales to consumers in recent quarters.

But Intel's quarterly earnings last week blew past expectations, showed 17% revenue growth from last year in its PC unit, and 32% in its data center (server) unit. So that suggests that businesses are picking up their IT spending, which will help Microsoft in all three of its major businesses -- Windows, business software (mostly Office), and servers.

Analysts will also be watching the Xbox business to see if Kinect continues to drive results there -- last quarter, the segment containing Xbox (Entertainment & Devices) showed trailing-four profits of over $1 billion for the first time ever.

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See Also:

• Microsoft Expected To Crush Earnings Tonight
• Microsoft Employee Built A 737 Cockpit In His Home
• Microsoft Antitrust Oversight Ends In May, But Don't Expect A Return To Its Old Ways

Source: http://feedproxy.google.com/~r/businessinsider/~3/gWmDQsr-Je4/microsoft-live-earnings-q3-11

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