Microsoft ignores the post-PC world and reports $4.97 billion profit on top of $19.90 billion revenue for Q4 2013

Microsoft recently celebrated the start of a new year – at least for those who watch Microsoft. July marks the start of the fiscal year for Microsoft and today they’ve shared their financial results for their fourth quarter of 2013. The big news? The company had a 10 percent increase in revenue for the same quarter the previous year. The Redmond company reported $19.90 billion in revenue for Q4 2013 as they enter their phase as a devices-and-services company.

Apparently we’ve entered a “post-PC” world, but don’t tell Microsoft as they bring in $19.90 billion in revenue, which resulted in net income (profit) of $4.97 billion. The company went on to post diluted earnings at $0.59 per share. It wasn’t all sunshine and daffodils as the Surface RT project lost Microsoft $900 million. Here’s how the main divisions within Microsoft did:

Windows - $4.411 billion revenue with $1.09 billion profit
Online Services - $800 million revenue with $372 million loss
Servers and Tools - $5.502 billion revenue with $2.33 billion profit
Entertainment and Devices - $1.915 billion revenue with $110 million loss
Business Division - $7.231 billion revenue with $4.87 billion profit

The format above is the last time you’ll see financial results reported like that. Because of the recent reorganization to a company that focuses on devices and services we’ll see a different structure. For example, devices like the Xbox, Surface and any other hardware makes falls under the leadership of Julie Larson-Green in the Devices and Studios division. It will be interesting to see how the financial structure looks one year from now.

More detailed analysis coming.

Source: Microsoft (opens in new tab)

83 Comments

As phones gets bigger and we move more towards mobility, I agree the PC market is dying a slow death. Someone counter argue my sentiments.
I don't think anyone can. This was a smart move for Microsoft on Windows 8 because it sort of starts to shift the market in that direction such as tablets, convertibles, etc even if it was criticized by many. But no matter what, I think there is still a place for desktops in a work like environment...
All staff at my organization who are frequently mobile are getting their desktops replaced with Surface Pro's attached to dual monitors and peripherals via a Targus port replicator (with DisplayLink). Works brilliantly and costs the same as a high-end desktop, so it just makes sense. I don't see the death of the PC so much as a blurring between PC and tablet, which Microsoft has helped along with Surface and Windows 8.
Ate you going to install the 8.1 beta or just wait for the official Blue?
have you found a way to add a firewire port to the surface pro?
@Denegar - YES!!!!
I've replaced my laptop with a Surface Pro 128 and a Toshiba DynaDock. The laptop replaced a tower 4 - 5 years ago. Microsoft's Surface Pro is brilliant! My setup has 3 monitors, an external HDD (x2), DVD R/W, wireless mouse and keyboard, and a wired GB network connection. Office 2013, Visio 2013, Project 2013, MapPoint NA 2013, Visual Studio 2012, Lotus 123, MS Works, AutoCAD, PaintShop Pro X5, Photoshop Elements 10, Nikon ViewNX 2, VMware Player, WMware vSphere Client, plus several other programs.

My MS Surface Pro tablet IS! my PC. There is no post-PC!
There will always be a need to have a desktop for a least the next decade. Until the tech is small and cheap enough to put it into a surface tablet. To be honest though I just bought a new touch screen dell and my surface gets used just as much if not more because I can take it with me. Mobility is the way of the future unless your a PC gamer.
True. PC gamer here, tablets will never be able to give the same performance that a desktop can. At least for the foreseeable future... I'm all for using a tablet for productivity, managing my business, but not for gaming.
I think AMD is looking to change your mind about that. Their upcoming (this fall) low power, tablet chip can already run the latest PC games at 1080p30. And while true, it is not gaming PC performance worthy, you can clearly see where AMD is going with this for successive iterations. I'd expect in another 12/18 months for them to hit games running at 1080p60 - again, on a tablet. And beyond that, to really start pouring on chip capabilities, so that PC games can begin to run with more and more features set to max. And that is a very seeable future, only a few years in the making. And that's just AMD. Intel is not sitting on their hands either, and Clover Trail looks to be bringning Intel's A-game to the party.
http://www.engadget.com/2013/01/10/amd-temash-reference-laptop-hands-on/

Yeah, you could argue that tablets cannot run games at some super high resolution like 2K or 4K and at 240fps. But to be honest with you, that argument's asinine. Only the most demanding of gamers even run games at resolutions beyond 1080p - the higher resolution monitors alone will set you back the price of a decent gaming rig (unless you buy it from Monoprice, that is). The point being, for the average PC gamer out there, the moment you hit 1080p60 with the games, and can run them with all the settings turned up to decent values, you've got a tablet good enough to replace your gaming desktop. And based on some of the tech I see coming, and guessing on some of the tech I know has to be in development, we are probably about a couple of years away from that mark.
It's not just resolution; tablets still can't offer the power required by the high-end games (for shaders / objects on screen, etc). While I love what AMD is trying to do, one should stay realistic. The simple fact that a PC graphics card can draw triple the amount power than a whole tablet should be telling you something.
Then again, if we will at some point get an extremely high speed port (like thunderbolt), we could have one device with a dock which offers more power.
The problem will always be based on these two axioms:
1) Games look better and better, and/or are set in bigger and bigger worlds.
2) The power a graphics chip manufacturer can pack into a tablet-sized chip or SoC will always be less than what they can pack into a dedicated graphics card; ie present-day portable tech will never catch up with present-day dedicated tech. In two years' time tablet tech may equal today's graphics technology in some ways, but it'll still be way worse than graphics technology in two years' time.
So there will always (until there are no more graphics limits to surpass, in 200 years or whatever) be portable tech that lags dedicated tech, and games designed to look best on the best hardware will filter down to look still good on console hardware, okay on game streaming hardware, and not great on tablets.
Robert and Co. You must be young, as you are totally missing the obvious.
Back in the 1980s, we were amazed at playing "Snake" typed from 8 pages for a Basic interpreter (you normally got your mum to type it) [O and 0 always causing confusion :) ]
Then saved the game to TAPE!
We watched Star Trek. They had personally communicators (flip the top and talk to anyone, anywhere0
Star Trek was science fiction. Well guess what, IN MY LIFETIME, we all have Star Trek personal communicators.
Point being, within your young persons lifetime - you will see screens with stupid resolution, and processors with stupid speed fit on your wrist, stuck in glasses, heck it might even be half implanted into your body.
It might seem far fetched now, but within 1 decade tablets will run games and look like the Xbox One of tomorrow. I can barely see this "big difference" between Console (Xbox 360) and my PC (660 ti nVidia) that PC fanboys bang on about. Its better yes, but not loads better - just a little bit.
Tablets will eventually be awesome on the graphics front, Moores Law will hold up long enough for that happen easily.
Define PC. My Surface RT running 8.1 says 'This PC'. And if PC is also large screens, then there will be no death at all. Your move :)
I thought the implication was always "post desktop PC". But yeah, I don't see anyone giving up their big monitors when they have work to do all day. I'd go crazy staring at a small screen all day. I think everything will become decentralised and more cloud-based. You'll have docking stations at home and work, but your data will be at your fingertips wherever you are. One day we'll all have eye or brain implants and won't need monitors :P
N0 reason to counter. The Phone will be a PC in 3 years when the foldable 7" tablet will be an Atom based computer with LTE running 1080P. At work the device will dock with a 27" monitor (touchscreen), blu-tooth keyboard and connect to the NETWORK via WiFI AC encrypted. The phablet will act as a second screen for voice calls and the monitor will display the web and installed local apps on these 64GB devices (or larger). WM Ware runing on an Atom phone.
Nothing is better than a laptop or desktop for productivity.
Amen.
The PC doesn't die, it just gets broader in definition. For "desktop" though, the market size does shrink, but I don't think it's going to wink out, unless those mobile devices start to match good ole desktops in horsepower. There are still many things smartphones and tablets simply aren't capable of.
It's the other way around. The smartphone as we know it now will take the place of the feature phones, and the PC-Phone is the next big step.
So you're saying that everyone will be holding 7" phablets on their ears?
No, your PC-tablet will be foldable. Flexible glass, flexible oled and flexible touch already exist. The only thing missing is new battery technology and foldable PC's are a reality. Don't get stuck in your thinking of how things are now.
So slow, grass grows faster. The PC will be around for the forseeable futue but will be sharing that space with Mobile. But as technology advances and minaturataion continues, I think Microsoft was smart to begin its march into mobility. But make no mistake, as long as manufacturers are making parts, the desktop PC will be around for years to come.
Mobility works for convenience. But for productivity, I absolutely need my desktop PC.
The PC market is not dying. It is maturing. The PC market isn't shrinking either. There are more PCs today than there ever were, and there will be even more next year. Only "growth" is slowing (which is what happens in maturing markets). I mean, television sales aren't growing at the rate they were in the 1950s... but there are a heckuva lot more of them now... and there will be more next year. Would you say the television is dying? Well, if you did, you would be wrong. It's just a mature market.

Second, how do you define "PC"? Is the Surface Pro a PC? What about Windows 8 convertibles, hybrids, etc? Of course they are... but they're also tablets.

Apple invented the modern tablet, but Microsoft is reinventing it again (or trying to) with Windows 8, Surface & other hybrids. Before Windows 8, tablets were basically large smartphones will no cellular service. After Windows 8, tablets can now be PCs... and PCs can be tablets.

While you are right that there is a "move towards mobility," you are flat wrong about the PC "dying a slow death." It's not dying at all. It's being reimagined & reinvented.

How's that for a counter argument?
I like your counter argument. +1
It's only dying in the consumer market. Consumers mostly browse the web, socialize, and play light games. A touch device great for that and is more mobile. For businesses or consumers who do more advanced thigs, you will always have a computer because touch devices don't work well for entering data or creating content. Tablets are good complementary devices to use along side a PC, but they can't replace it. The market has 2 problems. The first is the loss of consumers. The 2nd is that software isn't keeping up with the hardware. You can keep your computer much longer. The PC market will shrink, but it won't disappear.
But consumers are also employees, business owners, students, etc; all of which requires a PC that allows them to be productive in some manner, some require major horse power(desktop or server - corporate), while other require light duty (college students - laptop, hybrid). With the introduction of the dual purpose hybrid, If I were a business owner, I might consider having employees bring their own multifunction hybrid into the organization, saving me the expense managing them through group policies, etc only providing larger screens, wireless mice & keyboards
Touch desktop/big tablet/AIO is the new PC. I'd say it's a rebirth rather than a slow death ;)
anyone that thinks the desktop computer is going to die away clearly works in a field were serious computing power isn't required. So let's look at industries that actually make the world go around, deisgn, engineering, physics, biology. I work in engineering and there is never enough power to do the types of analysis into our designs, and as power gets greater, the detail of our analysis does as well. I work a lot on a laptop due to the travel my work requires and though my laptop can handle somewhat medium sized non-complex assemblies, i can't do any serious analysis or overly complex assemblies. And there is a long way to go for tablets to catch up to even what that laptop can do.
the point is the desktop will never dissapear because mobility of computing isn't necessary for a large percentage of world business and with that, size/form factor is irrelevant.
Quite obvious PCs are not going anywhere for now. Businesses rely on it and there's pretty much no alternative to a windows pc.
Until accounting along with a myriad of other functions can be done on a tablet, the desktop will continue to thrive.
The definition of pc is just changing to mobile computer, its still a pc just not as we know it. The gap between desktop and mobile is getting smaller but the pc is beginning to encompass both.
Exactly. It amazes me how many people don't seem to understand this simple and obvious observation/trend.
Agreed
I do not see PC going anywhere soon. The demand might get smaller, but it will continue to exist.
There is no such thing as post-PC world. Tablets are just a fashion fad that will die out im the next 3-4 years and people will be back to using laptops and desktops. As phones become bigger and more powerful, there would be no need for a tablet. Apple can say that tablets are now more used than laptops, but tablets are just a temporary fad.
That's not it, either. There's no such thing has a Post-PC World because Tablet's ARE PC's, in the finest since of the word. There more personal to you than a desktop is, and you use them like that. Those who talk about how the PC is ending are delerious. In my mind, it's evolving. Becoming something greater. A intercontected part of our lifes; that will truely make life easier.
Are you 80? Desktops will disappear long before a tablet. We are more likely to see a tablet and phone symbiotic relationship than anything else.
microsoft only has themselves to blame on Surface inventory issues. they alloacted too many to the US while the rest of the world sat frustrated wanting one. the Windows Store is flush with apps now and Microsoft needs to get the message and distribution right.
I'll agree it wasn't a good way to start...had a conversation with the crew at work about this, too. =[
Couldn't you argue that the PC is becoming more personal than ever. It's becoming more portable (PC-Phone incoming) and it's not limited to one per family as in the old days. Soon everyone will be carrying a PC of some sort at all times; that is where we're heading.
That's exactly what's happening. I don't know why people keep saying the PC is dying, it's not, it's just broadened in definition. Your mobile phone isn't just a mobile phone any more, it's a mobile PC. Plus then you have tablets - PCs. And laptops - also PCs. The desktop might be slowly dying off, and being replaced by more portable devices, but they are all still personal computers. Like you said, even more so than a post 2001 "PC"! (XP was the begining of making things 'personal' IMO)
Untill tablets can render video editing or even phones for that matter pc's and apple variation will still be around. Tell me can a 64 bit Sony Vegas run smoothly on a surface pro? Or any tablet? Not even close.
All this is good news, except for the Surface RT thing. I wonder what part The Verge will report on...
Eh, they reported that the Windows Division profits are up, despite "traditional" pc sales declining. http://www.theverge.com/2013/1/24/3911938/microsoft-q2-2013-financial-ea...
That's Q2; the article is from January.
Also a special 900 mil loss on Surface article. The Verge can't stand to not twist the knife at every turn.
And next PCWorld will report on the Verge article, claiming that it's the death of Microsoft. By the time Kotaku reports (I use the word loosely) on the story, the story will be that Microsoft has canned Ballmer, discontinued Windows and have switched all of their devices to iOS. Because that's how things go between the tech press and Microsoft.
RT losing money is no surprise...at this point it's more or less a dead horse.
wrong.
No I'm not...you're blind. RT will not make it and Intel is going to make sure of that.
RT us a minor flash for MS. They tried, but the public has clearly screamed, "Pro", we want ALL functionality. As HTML expands, the app world may suffer. I still prefer, as do most of my counterparts, to use "desktop" applications to the App itself.
no, HTML5 will remain a fragmented mess, it already is headed that way with Chrome forking webkit and standards css not being widely adopted.
I hate desktop apps, the design and modern UI make desktop apps extremely clunky. Everything is going touch one way or another, and the legacy desktop won't get us there.
PC is basically dead for homes. Though still thriving for business and the game and business oriented. PC makers should concentrate on tabs for homes and PC for business.
I need a new computer, mine just gave up and it wasn't that old...what do I do, ONLY use my Surface? =[
How many computers do you need for home? Surface can do it all. Unless your a hardcore PC gamer. PC parts can easily be bought and put together.
The desktop might be. Laptops will still be used for homes because many people want a larger screen and a keyboard and trackpad make many tasks easier that require more precision.
Don't you mean Microsoft reported this for 2012 Q4? How can they report their financial status for a quarter that hasn't started yet?
MS starts their FY (financial year) in the summer. In other words, they are now starting their Q1 FY14.
PCs are overly priced too high. Why buy a new PC when one can purchase a cheap Android tab and use the old home PC by just upgrading parts.
Because Android Blows!
+8.1
Because one is the most versatile computing tool and the other just a giant phone.
Overly priced? Compare the price of a PC today to what they were 4-5 years ago? I'm no market analyst or anything but prices have dropped for traditional PC's and we can also agree that there arr different price levels for different needs/wants. And how "old" are talking when referring to the old PC? Sometimes its just more price effective to buy/build a new one if its too old...
Why PC in decline if they are cheap?
-4.2.2
One question, how does this quarter in the life-cycle thus far of the Surface compare to that of the Xbox 360? I know that surface doesn't quite have the same hardware issues the Xbox had but I remember them sinking BILLIONS into that too...just a thought. =[
I love these discussions.
Look, when the content that drives the world is made on the rest of the silly things that pop in and out of existance every decade, then the PC will be dead. Here is a hint, content in any real form will always be created on full on computers, not the end devices.
And dear god lets not go into the PC is dead at home. Anybody that needs to efficiently get real work done needs a full computer. Hey look, it is my 23" photoshop tablet... lets go out for a day while the ARM CPU crunches this one filter for 12 hours.
The explain its decline? More folks at home are moving to tablets. Work can be done on tablets or convertibles. PC is and will be dead for homes. And when tablets become upgradeable and more powerful, even hardcore PC gamers will move to tablets. Its the future and MS is right to move OS to touch base.
There is a decline in sales figures, not in PC ownership. That's why I find this whole thing misleading. They're basing it on the idea that people upgrade all the time or need a new computer. Truth is an older computer suits most people's needs for most tasks and then they use tablet or phone for very general tasks. Most people upgrade what they have only when they need to.
I personally will always need a computer at home simply because I find using touch screen frustrating at times. I need a physical keyboard to type and I need a large screen to view. On top of that I need some power to do things. That's just for home, I won't even talk about my work. I don't see any of my activities changing in the next two decades from now.
Form factor will contribute, but is not the deciding factor for the death of the desktop. In fact, in the work environment we are still quite a few years away from pc death. Tablets and mobiles have had massive impact on consumer markets because consumer services require little input and editing. The work environment is different, with loads of input and editing. Mobile and tablet will by themselves not be sufficient to slay the desktop in the work environment. However, Software WILL kill off the desktop. As we move towards a world where software does more for us, and more intelligently, we may enter a world where I could just ask a computer to run a valuation under different scenarios rather than having to it myself in excel. The human value add becomes creativity (kinds of scenarios and combinations) while software does nearly all the analytical legwork. We're not far off that kind of intelligent analytical power, and at that stage voice and touch will become sufficient for a very large group of employees (and make many analysts redundant). In 10 years from now, the desktop will be limited to people working on core coding of intelligent software (ie for current mobile app coding, I could see the human element become limited to creativity, with nearly all legwork coding done by intelligent software).
Wow the windows division looks like it will no longer be a billion dollar machine for Microsoft in the near future. Profit wise I mean.
Why? The profit was still decent. You have to remember that Windows' primary sales comes from new PC purchases and volume licensing. Most consumers (and businesses) don't feel the need to upgrade yet because their XP/Vista/7 machines still work for what they need it for (most people just use it for basic things like internet and email and chatting). Lots of people bought those cheap netbooks, which will die pretty fast. Once support drops for the older OS's and prices for convertibles and touch screen parts lower, you'll start to see profit drive again, similiar to how WIndows 7 did.
Did the profits for the windows division drop to nearly a billion dollars?
Obviously. They *only* made a billion on it after putting in 4 billion (that's a 25% profit). They should be shot for having such lowly numbers. I mean who, in this day and age, only gets a billion dollars in profit?
i must say that Microsoft has started to do a great job with their commercial. The way show off multitasking against ios is great.
Do people actually believe in that whole post-PC fluff?
The PC will never die completely. For people who type and do general office work (data entry & stuff), nothing will replace a desktop. People need/want large monitors, keyboards and a mouse at a desk with a comfortable chair.
There are sometimes and somethings that a tablet or even laptop are just not the best for.
Agree.
Ok, so Surface RT is a Flop... We knew that. MS needs to bring out a smaller Surface Pro. Like 7.8 inches.
My personal computer will now be a tablet. PC isn't dead... it's evolved.
Woohoo! Go MS!
This was a terribly written article...

Also, your numbers don't add up: Windows - $4.411 billion revenue with $1.09 billion profit Online Services - $800 million revenue with $372 million loss Servers and Tools - $5.502 billion revenue with $2.33 billion profit Entertainment and Devices - $1.915 billion revenue with $110 million loss Business Division - $7.231 billion revenue with $4.87 billion profit
The revenue fits ($19,859 billion) but the profit is $7,808 billion? Bu the article says $4.97 billion? And where is the RT loss? Something's not right there...

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