Microsoft Makes More Money, Fewer Xboxes

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A few days ago, we reported Apple's stellar quarterly earnings, not because we're going all Wall Street, but because we heart Apple. (Like you didn't know.) One brave reader named Jim called us on the bias, saying that Microsoft did amazingly well in its most recent quarter, and deserves a bit o' Gizmodo love.

"Why aren't you reporting Microsoft's successful quarter?" wrote Jim. "Hey, maybe you have it wrong, and Vista is a huge success...and it can only get better with worldwide sales."

Well, Jim, wherever you are, when you're right, you're right. Microsoft did have an impressive quarter, but there was also some grimness tucked in with those upwardly moving graph lines.

First the good news: Microsoft did make a bitchload of profit this past quarter, $4.93 billion up from $2.98 billion a year earlier. It's almost entirely attributed to Vista and Office 2007. The other Steve (Ballmer) did some expectation management back in February, saying people were overestimating Vista sales. His remark was either wrong or carefully calculated (or both), because Wall Street aimed lower and Microsoft delivered higher.

Keep in mind, Microsoft didn't release the actual Vista sales figures, however, just how much money they made selling Vista. Will sales continue to surge? Probably, since it will continue to be an excuse for people to buy a new computer. (Our reader, Jim, thinks so, too. However, if he happens to be wrong a year from now, we expect an apology in writing.)

The part of Microsoft that most applies to Gizmodo readers—the Entertainment and Devices division—reported that it had cut its losses on Xbox from $402 million a year ago to $315 million in this last quarter. CFO Chris Liddell even confirmed that Xbox and Zune would even be profitable in 2008! But these were also sad numbers: Microsoft cut its losses by selling only 500,000 Xboxes in the quarter, down from 1.7 million a year ago. Declining sales this early in the console war can't be a good thing. And mind you, there was no talk of Zune sales figures. That we will worry about when we start seeing them on the subway.

So there you have it, Jim (and anyone else who is still reading), Microsoft made some money, but it seems it will need to start spending again. We didn't even touch on the third front, Microsoft's ad war with Google. Redmond picked up a little momentum this past quarter, but if you believe our brothers at Valleywag, there ain't no stopping the steamin' GOOG.

Microsoft shares gain as earnings surge [MarketWatch]
Microsoft's Console Sales Slowing Down [The Mercury News]