However, as you look at the numbers, it's clear that Microsoft has some big worries ahead. Windows sales, usually the big driver of the company's revenue, are already drooping. Windows 8 now looks as though it will ship late in 2012, which means no upgrade fix for a long time. It's going to take a lot more copies of Office 2010 and Kinects to make up a shortfall.
Here's a table from Microsoft showing revenue by business division:
Microsoft business division, the home of Office and other business software packages, grew by 24 percent. The company says that license sales for Office are 50 percent ahead of Office 2007 at an equivalent point after launch, which is good news. Entertainment and devices had even hotter growth at 55.3 percent, as 8 million Kinect units went out the door in 60 days. And although it's not a huge hit yet, 2 million Windows Phone 7 units last quarter is certainly better than the ill-fated social networking phone, the Kin.
Not so good news is Windows. Revenue for the quarter was down by 29.7 percent. Microsoft has an explanation:
Prior year results reflect the recognition of $1.71 billion of deferred revenue relating to the Windows 7 Upgrade Option program and sales of Windows 7 before general availability in October 2009. Second-quarter growth rates for revenue and earnings per share were 5% and 4% respectively. Without the deferred recognition in the prior year, second-quarter growth rates for revenue and earnings per share were 15% and 28%, respectively.Technically, this may be true -- but still, compare the first six months of the two years, and you'll see that Windows was down by 2.2 percent. Sure, there was pent up demand, but the product didn't hit general release until late October 2009 and so there was more time to recognize sales in 2010.
Windows is vital to Microsoft -- one of the two pillars of the company's success. When that starts to decline over time, and people find that they don't need to upgrade to Windows 8 because 7 is good enough, the company will face problems that will dwarf quarterly revenue in size.
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