Microsoft Surface sales top $1b in back-to-back quarters

Booming Surface and Lumia sales have offset dampening demand for Windows, with Microsoft reporting a fall in its quarterly overall profit in line with forecasts.

The US vendor announced that revenue from the Surface has grown 24 percent to hit US$1.1 billion for the quarter ending 31 December, driven by the latest Surface Pro 3 model. In the previous quarter Surface tablet sales reached US$908 million.

Microsoft maintains a restricted channel for tablet sales in Australia. As CRN has reported previously, resellers outside of the chosen 14 of Data#3, e-Volve, Dimension Data, Brennan IT, Triforce, Trident, Insight, Ensyst, Somerville Group, Staples, Stott & Hoare, ASI, Datacom, and Learning with Technologies are still expressing considerable angst on their inability to sell the devices to their clients.

Microsoft also attributed "growth in affordable smartphones" in selling 10.5 million Lumias, reaping US$2.3 million in phone hardware revenue. According to Techcrunch, both the Surface and Lumia results are all-time records.

The strong performance in those areas softened the impact of sluggish personal computer sales which have dampening demand for Windows software. Microsoft has also struggled with the impact of the strong US dollar.

Shares of the world's largest software company, which have surged to 14 year highs in the past few months, fell 3 percent in after-hours trading to US$45.63.

"While currency is a headwind for Microsoft and other large international companies, we would characterise the headline numbers as good enough, although some bulls may have been hoping for a bigger beat," said Daniel Ives, an analyst at FBR Capital Markets.

Microsoft's flagship Windows business has been under pressure for three years as PC sales have declined, although the market appears to be stabilising in recent months.

Currency shifts against the strong US dollar also crimped profit in the fiscal second quarter, although Microsoft did not specify by how much. Microsoft gets almost three-quarters of its revenue from overseas, but a significant amount of that is still in US dollars.

"Overall, the only surprise I think was in commercial licensing, where we had a little bit of a headwind from foreign exchange as well as macro conditions in China and Japan," the company's chief financial officer, Amy Hood, said in a phone interview with Reuters.

Commercial licensing is chiefly sales of Windows and Office to business customers, which is Microsoft's biggest revenue generator.

Microsoft reported profit of US$5.86 billion, or 71 cents per share for the latest quarter, compared with US$6.56 billion, or 78 cents per share, in the year-ago quarter.

Sales rose 8 percent to US$26.47 billion, largely due to the acquisition of Nokia's phone handset business last year.

Analysts had expected revenue of US$26.3 billion and earnings of 71 cents per share, on average, including some restructuring costs.