Microsoft on Thursday reported its net profit slipped in the last quarter despite record-high revenue boosted by insatiable demand for Kinect controllers for Xbox 360 consoles.
The US technology titan made US$6.63 billion in net profit on US$19.95 billion in revenue in the quarter ending Dec. 31.
Net profit for the quarter was slightly below the US$6.66 billion the firm made in the same period a year earlier even though revenue climbed nearly US$1 billion.
“We are enthusiastic about the consumer response to our holiday lineup of products, including the launch of Kinect,” Microsoft chief financial officer Peter Klein said. “The pace of business spending, combined with strong consumer demand, led to another quarter of operating margin expansion and solid earnings per share growth.”
Microsoft boasted that it sold more than 8 million gesture-sensing Kinect controllers for Xbox 360 videogame consoles in the 60 days after it hit the market in November.
Kinect lets people control on-screen action with body movements or spoken commands and is priced at US$150.
A 55 percent growth in revenue at Microsoft’s entertainment and devices division was credited with boosting the money the company took in during the quarter.
Klein cautioned that the mark-up on Kinect and Xbox hardware was lower than for the company’s other products, but said that they came with opportunities to make money from video games, digital films and other offerings.
“Kinect is the fastest selling consumer electronics device in history,” Klein said during a conference call with analysts. “It is the first step to fundamentally change the way people interact with computers.”
He estimated that revenue in Microsoft’s entertainment division would grow 50 percent in the current quarter.
Microsoft said Windows 7 has become the fastest selling operating system in the company’s history and now runs more than 20 percent of PCs connected to the Internet.
Highlights in the recently-ended quarter included the launch of Windows Phone 7 software in 30 countries, and the completion of a deal to use Microsoft’s Bing engine to power search at Yahoo Web sites.
Bing’s share of the search market was 12 percent at the end of the quarter and Microsoft’s portion of online search and display ad revenue had grown to 23 percent, Klein said. Microsoft has been “laser beam focused” on increasing Bing’s share of the market, according to Klein.
Microsoft said that its shift to offering software as services in the Internet “cloud” continued to gain momentum in the quarter, with film studio Pixar Animation being among the companies using its Azure platform.
The shift to Microsoft “cloud” offerings is inevitable and “once it starts to accelerate, it is going to accelerate pretty fast,” Klein said.
Businesses are likely to spend more on computers than consumers, with emerging markets being hotter than established ones, Klein predicted. That represents a mixed blessing for Microsoft, because while business network gear generally costs more, prices in emerging countries tend to be about half of what they are elsewhere, according to the executive.
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