January 28, 2013, 10:57 AM — Revenue at Microsoft's Windows division was up 11% in the fourth quarter of 2012, bucking the long-running trend where the company's OS sales have mirrored PC sales.
But the unexpected results, which made Windows the company's top revenue-producing group for the first time since 2009, did little to answer the question on analysts' tongues: How did Windows 8 perform in its first sales test?
"I heard absolutely nothing on how Windows 8 is doing," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. "I have to believe it's because it's not an impressive number. If it was, there would be horns being blown at the top of the buildings in Redmond."
That silence may speak volumes. By most accounts, Microsoft's new Windows 8 operating system has not provided the sales "pop" to the PC industry that a new edition has typically delivered -- a sign many have read as trouble for Windows 8 specifically and Microsoft overall. In the fourth quarter of 2009, for instance, when Microsoft launched Windows 7, the company recorded $6.9 billion in Windows revenue, a 28% increase over the prior year.
This upgrade cycle, Windows' revenue was $5.9 billion, representing a 24% increase over the same period in 2011, or an 11% jump after adjustments for early sales of Windows 8 and a $15 upgrade offer to buyers of new computers.
But as both numbers were at odds with estimates of PC sales, which research firm IDC recently pegged as down 6.4% for the quarter, analysts struggled to parse Windows 8's execution.
"It was all kind of confusing," acknowledged Bob O'Donnell, an analyst with IDC in an interview Friday, of the revenue upswing in the face of declining PC sales. Windows revenue typically syncs with PC shipments; as the latter rise and fall, so do sales of Windows licenses.
Microsoft executives did tell Wall Street analysts last week that the company had sold 60 million Windows 8 licenses, but that milestone had actually been announced weeks earlier. And as is its practice, Microsoft did not separate Windows 8 revenue from the division's total, which also included sales of Windows 7 and the new Surface RT tablet.
In last Thursday's earnings call, Microsoft CFO Peter Klein explained how the Windows division outperformed the PC market.