updated 07:25 pm EDT, Thu April 28, 2011
Microsoft Q1 2011 sees Apple outpace it in profit
Microsoft on Thursday night suffered a symbolic loss as its results confirmed that Apple had beaten it for the first time in pure profit. Although Apple had already outgrown it in market cap last May and through revenue in October, its $5.99 billion net income was enough to outpace Microsoft's $5.23 billion. Apple's revenue lead was also noticeably wider, at $24.67 billion to Microsoft's $16.43 billion.
The disparity may have been directly attributable to Apple's effect on Microsoft's performance. Overall drops in the PC business led Microsoft's core Windows division to lose four percent of its revenue year-over-year "in line with the PC trends." It revealed that revenue from netbook Windows licenses crashed 40 percent as the iPad stole much of the mini-notebook category's market share.
Total revenue was still a record for Microsoft's first quarter, but much of the profit was carried on the back of the Business Division, which had strong success with Office. The Entertainment and Devices group also contributed a large part with runaway Kinect sales and a 60 percent bump in revenue. The Online Division handling Bing and other web efforts saw its revenue grow by 14 percent to $648 million but wasn't enough to avoid it becoming a liability, as the losses grew even larger to $726 million.
Bing managed to get 13.9 percent search share, helped both by its deal to run Yahoo search and gains mostly at non-Google rivals' expense.
Apple's win in profit is considered crucial as it has always been the toughest goal for the company to reach. While Macs, iPads, iPhones, and iPods usually cost more than a copy of Windows and made revenue relatively easy, the lower costs of developing, shipping, and selling software by itself had previously kept Microsoft ahead. The overtake reflects Microsoft's still-slipping mobile market share in spite of Windows Phone 7 and its inability to translate a nearly nine-year-old strategy for the Windows Tablet PC platform into meaningful sales. In nine months, Apple sold more iPads than every Tablet PC ever made and has been successful in luring customers over from Windows netbooks and entry-level notebooks.