Windows 8 helped Microsoft's Windows division record a 24 percent increase in revenue for the fourth fiscal quarter to $5.88 billion, but the company's overall profits fell 3 percent in the period ended Dec. 31, 2012.
The Windows revenue included a good chunk, about $783 million, in deferred pre-sales of Windows 8. Excluding that, Windows revenue increased 11 percent for the quarter.
Microsoft released Windows 8 midway through the quarter, giving it almost two months of revenue for the last part of 2012. CFO Peter Klein suggested three key drivers for Windows revenue in the fourth quarter: retail upgrades, Surface tablet sales and multiyear license agreements.
"There is some tailwind you typically see in a launch quarter, but those were the three biggest components," Klein told analysts on a conference call.
Windows 8 also spurred Windows phone sales to reach four times the revenue the category reported in the fourth quarter last year, with Klein citing expanded relationships with carriers and device makers around Windows 8 for the growth.
"Our big, bold ambition to reimagine Windows as well as launch Surface and Windows Phone 8 has sparked growing enthusiasm with our customers and unprecedented opportunity and creativity with our partners and developers," Microsoft CEO Steve Ballmer said in a statement.
Microsoft earned $6.4 billion, or 76 cents per share, on $21.46 billion in sales for the fourth quarter, beating Wall Street estimates by a penny per share. Analysts had projected earnings of 75 cents per share on $21.53 billion in revenue
Meanwhile, Microsoft's Business Division growth declined 10 percent to $5.69 billion in as-reported revenue, or 3-percent accounting for deferred sales, as the company preps for a new version of Office.
The company's Entertainment and Devices business saw sales fall 11 percent to $3.77 billion.
Microsoft offered scant details of its Surface tablet, released in the fourth quarter with a Windows RT version. A Windows 8 Pro version will launch Feb. 9.
Klein said Microsoft has increased production on Surface, and it will be available in 14 additional countries. The company offered no insight as to if or when it might be available to the channel.
"We think of Surface as one part of the overall Windows 8 story. It's a contributing factor to growth in the Windows business. It highlights the innovation that can happen when you integrate hardware and software in a new category of devices. We had limited distribution this quarter. We're excited to expand that. Our goal is to grow that business, expand geographically, expand the product lineup, retail distribution and capacity," Klein said.
One analyst asked Klein about what Microsoft has learned from customers about Windows 8 and Surface so far, and Klein said the company knows customers want a variety of devices at a variety of price points.
"We will work closely with chip partners and OEMs to bring the right mix of devices, the right touch devices at the right price points. You'll see a greater variety of devices at a bigger variety of price points," Klein said.
Meanwhile, on the analysts call Microsoft did not discuss a rumored $1 billion to $3 billion investment as part of a possible leveraged buyout of Dell.
For the current quarter, analysts expect earnings of 78 cents per share on sales of $20.76 billion. Microsoft shares closed at $28.00 Thursday, up 39 cents or 1.4 percent.
PUBLISHED JAN. 24, 2013