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January 20th, 2012 
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Microsoft’s Kinect and Xbox business picked up the slack as its core Windows division faltered, but pressure is intensifying on its mobile initiatives to propel the company forward
The Redmond, Wash.-based tech giant’s revenues went up 5 percent this quarter to $20.5 billion, pointing to the success of CEO Steve Ballmer’s strategy to refocus energies on tablets, smartphones, and cloud computing as consumers go increasingly mobile in their computing choices.
Microsoft co-founder Paul Allen anticipated the company’s priority shift, stating, “Here’s what the death knell for the personal computer will sound like: ‘Mainly I use my phone/pad, but I still use my PC to write long emails and documents.’ Most people aren’t there yet, but that’s where we’re headed.”
Brisk Xbox and Kinect sales propelled Microsoft’s Entertainment and Devices division, with 15 percent reported growth. Its popular Kinect technology bolstered the numbers. Kinect, a motion-sensing device that hooks up to the Xbox, broke gadget sales records when it came out. Analysts expect continued sale success for both Xbox and Kinect, a motion-controlled technology that it will likely integrate into future devices.
In addition, Microsoft profited from healthy sales of its Office software, and introduced a cloud-based Office suite meant to compete with Google, Amazon, and Apple’s cloud software to attract businesses. It is developing the Office suite for the iPhone and iPad, a move to integrate its software into more mobile platforms. The company attempts will also launch Windows 8 next year to aggressively compete against rivals.
Microsoft will also continue to boost momentum in the mobile market this year as its partnership with Nokia begins to bear fruit. Last year, the Finnish mobile company agreed to feature Windows as its primary OS. European sales of the Nokia Lumia 800 exceeded expectations, as Nokia struggled to meet consumer demand. Nearly half of smartphone users are considering a switch to Windows, which bodes well for the Lumia 800′s North American debut.
However, Microsoft continues to struggle in the interim with the impact of smartphones and tablets on PC sales. Windows 7 and Windows Compact 7 failed to establish a stronghold in smartphones and tablets, and aged rapidly. Microsoft’s 2012 launch of Windows 8 will offer the company an opportunity to reintroduce its operating system to consumers increasingly reliant on mobile technology.
Windows 8 is the first OS tailored for both tablets and PCs, and tablet makers like Acer said they will explore the new OS in 2012 offerings.
The Windows division wrestled for yet another quarter with lagging PC sales. Though Microsoft cites Thailand’s flooding-induced shortage of hard drives for some of the downturn, the steep decline in netbook sales is likely more responsible for the dip. Demand for netbooks are eroding in the face of increasingly affordable and popular tablet options, especially the iPad.
Microsoft’s continued success hinges on its ability to push its mobile products into competition with Google’s Android and Apple’s iOS, as well as its sustained focus on innovations in its entertainment and software divisions.
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