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Xbox and Surface sales boost Microsoft

Simon Quicke

A busy Christmas with decent Xbox One sales and a pick up in consumer interest in the Surface tablet helped boost Microsoft's numbers and help the vendor beat revenue expectations.

The consumer business grew by 13% with 3.9m Xbox One units in just over five weeks and the vendor also reported better Surface sales with retail doing a better job of promoting the tablets in the second fiscal quarter.

There was also a decent performance in the commercial side of operations with growth of 10% year-on-year as Microsoft put more emphasis on its cloud strategy and the vendor also saw improving prospects in the business PC space.

"Business PCs grew again, for the third consecutive quarter, and benefited from an improving macro-environment, better availability of innovative new hardware, and a refresh cycle ahead of Windows XP end of support," said Amy Hood, CFO and executive vice president at Microsoft.

"Additionally, growth was higher in large enterprises than small and medium-sized businesses. Consumer PCs, while better than our expectations, continued to be soft, as they face challenges from competing form factors. And, as a general theme, developed markets outperformed emerging markets," she added.

Revenue for Q2 increased by 11% to $24.5bn although operating income declined by 4% to $8bn and the cost of goods increased as money was spent supporting the launch pf Xbox One and Surface products.

Although the consumer and devices segment grew by 13% there were issues with the licensing segment, which includes the Windows OEM business, which declined by 6%, which was blamed on the general PC market trends.

Although traditional consumer Office licensing fell by 24% around 16% of that decline was offset by those customers moving to the firm's cloud-based alternative Office 365.


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