XBox Sales Boost Microsoft

The technology giant saw a bounce in consumer sales last summer – but analysts expect poor Nokia sales to be a drag on future earnings

Norman Young 28 January, 2014 | 12:47AM

As the computing world changes, Microsoft (MSFT) is a story of two companies: a lagging consumer and devices firm, and a firm whose dominance in the enterprise world is growing.

But Microsoft reported second-quarter results that were ahead of expectations, as better than anticipated devices and consumer sales combined with typically solid commercial growth to drive the outperformance. The firm was able to mitigate the effects of the continuing decline of the PC market with sales of cloud offerings, new devices, and expense controls. We are raising our fair value estimate to $39 from $38 and maintaining our wide moat (sustainable competitive advantage) rating.

Total revenue increased 14% year over year to $24.5 billion as devices and consumer revenue grew 13% to $11.9 billion, and commercial revenue grew 10% to $12.7 billion. There were several bright spots driving the top line: commercial remained strong, as key products gained share over rivals, while the holiday season saw the firm finally making some gains in consumer hardware--surface tablet sales more than doubled from the fall quarter to $893 million, and the Xbox One sold 3.9 million consoles in five weeks.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Microsoft Corp200.39 USD-1.24

About Author

Norman Young  is a Senior Stock Analyst for Morningstar

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