Even Bing Improved: Microsoft Earnings Indicate Comeback

Oct 25, 2013

Microsoft's earnings were better than expected.
Microsoft's earnings were better than expected.
Credit Flickr Photo/Vernon Chan

Microsoft stock rose 6 percent after an earnings report that had analysts cheering. The Redmond, Wash.-based employer has been struggling to change as consumers move away from computers and toward mobile devices.

Microsoft’s earnings show the company is getting traction. Sales and profits are up. Business services were strongest, with cloud computing showing 100 percent growth. Tablet sales picked up. And even the Bing search engine did better. It’s now 18 percent of all US searches.

This was Microsoft’s first earnings report since its reorganization into a devices and services company.

Al Hilwa, Director of Software Development Research at IDC in Seattle, said a different portrait of the company has emerged.

"This is by no means a company on the ropes like it’s been portrayed the last few weeks,” Hilwa said. “This is good news on multiple fronts."

Every unit of Microsoft did better than analysts expected. Among the surprises: Consumer personal computer sales are not falling as quickly as previously believed.

Though device sales improved, Microsoft still has a low market share overall, with Apple and Google ruling the market.

"For Microsoft to catch up there, they have a very long ways to go," said Sid Parakh, technology analyst at McAdams Wright Ragen in Seattle. "When you look at these numbers, they are clearly better in the context of what those numbers looked like in the past, but again they are nowhere near where they need to be."

Microsoft has more challenges ahead. It needs to get consumers attached to Windows 8.1. The operating system is pivotal to the company’s strategy of a single user experience from computer to mobile device. The company also needs strong sales over the holidays – and to replace CEO Steve Ballmer, who is leaving in the next year.