Windows revenue falls 13%, share of sales drops to 23%

'Microsoft is a commercial software company, not an OS company,' argues analyst

By , Computerworld |  IT Management, Windows

"In the first quarter [of our fiscal year] we expect to defer $1 billion to $1.2 billion related to the Windows Upgrade Offer and presales of Windows 8 to OEMs prior to general availability," said Klein yesterday.

Microsoft will account for that deferred revenue and the $540 million for last quarter, during the first quarter of 2013.

The upgrade program, which Microsoft announced June 1, lets buyers of new PCs powered by Windows 7 to purchase an upgrade to Windows 8 Pro for $14.99 when the new operating system goes on sale Oct. 26. The deal covers PCs bought between June 2, 2012 and Jan. 31, 2013. Customers must download and pay for the upgrade by the end of February 2013.

The other money-making divisions of Microsoft -- Business, which handles the Office suite, and Server and Tools -- both beat Windows in sales last quarter. The Business group generated $6.3 billion while Server and Tools did $5.1 billion.

The Business division accounted for 34.8% of all revenue; Server and Tools produced 28.2%.

Moorhead pointed out while Windows isn't the revenue driver it once was, that puts Microsoft in a better spot than many think.

"We have all this industry talk about Windows 8.... Windows 8 is important, but this is a world with essentially free operating systems in tablets and phones. Over the next two years, tablets will encroach on the notebook space, so [the decline in importance of Windows] has put Microsoft in a much better position over the last five years or so."

Moorhead's scenario allows Microsoft's prime engine, Office, to become even more important, and profitable. "Office will be everywhere, on the iPad, cloud-based, on phones," he said, noting that as Windows' position relative to revenue continues to shrink -- "I see that percentage coming down even more dramatically," he added -- Microsoft won't hesitate to put Office on devices powered by rivals' operating systems.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is

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Originally published on Computerworld |  Click here to read the original story.
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