Microsoft earns less from Windows and more from Internet services

Microsoft sold much fewer Windows licenses in the first quarter of this year, but at the same time earned much more from its Internet services, which include Azure and Office 365. In total, Microsoft made more sales, but less profit.

In the past quarter, Microsoft received considerably less from the sale of licenses, for example for Windows and Office: the turnover among consumers fell by no less than 24 percent, to 3.5 billion dollars. That is equivalent to 3.2 billion euros.

At the same time, revenue from license sales to companies fell 3 percent to $10 billion. Sales of Office in particular fell sharply: Microsoft earned 41 percent less Office licenses. According to Microsoft, this is largely because consumers switched to Office 365, the subscription model for Office. According to Microsoft, fewer Windows licenses are also being sold because companies have now upgraded from Windows XP to a newer Windows version. In addition, Microsoft no longer charges license fees for devices with a screen smaller than 9″.

At the same time, Microsoft earned much more from its Internet services. This includes not only its search engine, with which Microsoft earned 21 percent more, but also its branch with business ‘cloud services’. With this, Microsoft earned 106 percent more, mainly thanks to increased interest in the business version of Office 365, Azure and Dynamics. It’s unclear how much more Microsoft earned from its consumer Internet services; Microsoft categorizes this under one heading, ‘Other’, which also includes Bing and Xbox. That branch earned 25 percent more, namely 2.2 billion dollars. Microsoft does indicate that the number of subscribers to the consumer version of Office 365 increased by 35 percent compared to a year earlier, to 12.4 million.

Windows Phone license sales fell 16 percent, according to Microsoft, mainly because more cheap Windows Phone devices were sold, from which Microsoft earns less. Microsoft’s phone business, essentially the portion of Nokia that Microsoft bought last year, made $1.4 billion in the quarter. Microsoft sold 8.6 million Lumia devices. Sales of Surface tablets increased: Microsoft earned $713 million, 44 percent more.

In addition, Microsoft earned 49 percent more from the sale of first party games, thanks in large part to Minecraft, which Microsoft acquired last fall for $2 billion. With the Xbox division, however, Microsoft earned 24 percent less, according to Microsoft mainly because of price reductions of the Xbox One. Also, fewer Xbox Ones were sold.

In total, Microsoft earned $21.7 billion in the first quarter, 6 percent more than a year ago, when $20.4 billion came in. Operating profit, a good indicator of a company’s financial health, however, fell from $7 billion to $6.6 billion. According to Microsoft, this is partly due to 190 million dollars in costs incurred for the integration of Nokia into the company, and the high price of the dollar.