Microsoft earnings: What to watch

January 24, 2013

Microsoft will report fourth quarter earnings after the stock market closes today, giving investors their first peek into how the company has weathered after a year of big bets and drastic changes.

As the worldwide PC market continued to weaken, Microsoft unveiled a major revamping of its operating system and moved forcefully into the hardware business, launching its Surface tablet.

But investors haven’t been able to piece together a clear idea of whether Microsoft’s strategy is paying off.

So far, the company’s attempt to jump into the tablet market appears tepid at best.

Web analysis firm Chitika reported that the Surface captured just 0.13 percent of all tablet sales in early December, and The Next Web reportedthat the company moved 1 million of the tablets over the holiday season.

While Microsoft has been fairly silent on how its tablet has fared so far, it has been upbeat about the pace of Windows 8 adoption. The firm reported in late November that it had sold 40 million Windows 8 licenses in the span of a month, outpacing the adoption rate of Windows 7.

Still, reviews of the company’s touch-enabled operating system have also been lukewarm. Switching between Microsoft’s new tile-based interface and the legacy desktop can be jarring, and it’s not particularly intuitive to use with a keyboard and mouse. Chances are that the system probably won’t come into its own until more consumers buy laptops and desktops with touchscreen displays — products that Microsoft partners like Samsung, Acer, Dell and Asus are marketing heavily.

There was also good news for Microsoft’s mobile operating system in Nokia’s earnings released Thursday morning. The struggling smartphone company reported surprisingly strong sales for the Lumia 920 smartphone, which is based on Microsoft’s software. That could provide hope for Microsoft’s effort to gain a foothold in the smartphone market.

Overall, analysts expect the firm’s revenue to grow about 4 percent from $20.9 billion the company posted in the same period last year to around $21 billion. Even if Microsoft continues to show weakness in its consumer product, including the Surface, sales of its enterprise software and Xbox could help offset those results.

Related stories:

AP: Microsoft to sell Surface Windows 8 Pro on Feb 9 for $899

Microsoft’s Ballmer shows up at CES, after all

Bloomberg: Microsoft risks straining PC partnerships with Dell investment

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Hayley Tsukayama covers consumer technology for The Washington Post.
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