Microsoft Surface revenue hits $1 billion in a quarter

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Microsoft Surface revenue hits $1 billion in a quarter

Sales of Microsoft's Surface tablet-laptop computers reached US$908 million in the company's first quarter with the third generation of the product gaining market traction.

Microsoft has attributed the result largely due to the Surface Pro 3, which went on sale in June.

"Surface had strong results this quarter, driven by positive customer response to Surface Pro 3," chief executive officer Satya Nadella said Thursday during a conference call with financial analysts to discuss Microsoft's first-quarter financial results. "The product lineup is the right one and customers are responding favorably."

By contrast, Apple's iPad revenue has fallen, though from a much higher level. Apple recorded US$5.3 billion in revenue from iPad sales in its latest quarterly financial results.

Earlier generations of the Surface product, especially those running the Windows RT version of Windows 8, were widely seen as commercially unsuccessful. Last year Microsoft reported a US$900 million inventory adjustment for Surface RT. But Surface has been winning market acceptance more recently, especially with the Surface Pro 3 product.

The Surface-related revenue in the quarter marked a 127 percent gain from Surface sales in the same period one year earlier.

Chief financial officer Amy Hood, also speaking on the call, said Microsoft expects Surface unit sales to grow sequentially in the current quarter, although she did not provide specific numbers.

"We are excited by Surface Pro 3 performance," Hood said. "Its sales are pacing at twice the rate of what we saw with Surface Pro 2."

She said the product is winning among students, professionals "and, increasingly, enterprises."

Pleased with progress

Microsoft reported total revenue of US$23.2 billion for the company's first fiscal quarter ended 30 September, up 25 percent from the year-ago period.

Net income was off more than 13 percent to US$4.54 billion in the September quarter. The reduced profits were largely due to US$1.14 billion in expenses from the restructuring and layoffs in the company's smartphone division announced in June.

Nadella painted a picture of a company generally headed in the right direction both financially and from a product perspective.

"I'm pleased with the progress we are making," he said. "Results are up in every category from commercial, to consumer, to hardware."

Revenue from Microsoft's phone hardware operations totaled more than US$2.6 billion as the company reported selling 9.3 million Lumia phones in the quarter.

Sales of phones other than Lumia declined during the quarter. Microsoft acquired mobile phone manufacturer Nokia in April for US$7.2 billion.

Nadella also touted Microsoft's growing cloud software sales. Commercial cloud revenue grew 128 percent year-over-year, including sales of Office 365, Azure and Dynamics CRM. Office 365 Home and Personal subscribers now total more than 7 million, representing more than 25 percent sequential growth.

Sales of Office Commercial products and services grew 5 percent as customers transition to Office 365, the company said.

Commercial licensing revenue increased nearly 3 percent to US$9.87 billion in the quarter. Server products and services revenue grew 13 percent with double-digit growth for the SQL Server database, System Center and Windows Server.

Microsoft also reported double-digit sales growth for its Lync, SharePoint and Exchange products. And Windows volume licensing revenue increased 10 percent in the quarter.

This article originally appeared at crn.com

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