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Are the Xbox and Kinect saving Microsoft?
Microsoft's latest earnings report was boosted significantly by its booming video-gaming division — but its long-term future is far from assured
 
Though Microsoft took a hit with its Window's operating system, it's making a profit in the gaming world with XBox and its Kinect controller.
Though Microsoft took a hit with its Window's operating system, it's making a profit in the gaming world with XBox and its Kinect controller.
Corbis

Microsoft's standing in the tech world sure has changed, and its latest report to Wall Street proves it. Earnings results released Thursday show that the software giant's Windows operating system business has slipped as PC sales decline and tablets grow in popularity, while other companies take the lead in mobile-computing software. (Quarterly profits at Apple have now surpassed those at Microsoft.) Even so, Microsoft "made a lot of money" in its fiscal third quarter, posting a profit of $5.23 billion, up 31 percent from the year before. That surge was driven by sales of Microsoft Office software — and by a big jump in sales of the Xbox and its Kinect controller. So are video games saving Microsoft?

Xbox and Kinect "helped save the day": "Microsoft likes to talk about how its business doesn't rely on personal computer sales to consumers," says David Goldman at CNNMoney. "It proved the point this quarter." Companies are still buying Microsoft's products, so sales of Office software were up, but the Xbox and Kinect were also "incredibly strong." Investors have long worried about how Microsoft will fare in a post-PC world, and these results let the company tout the "breadth" of its business.
"Microsoft profit soars 31% on strong Office and Kinect sales"

But Office and Windows are still the "cash cows": Microsoft has long relied on its pair of powerhouse software programs, says Mary Jo Foley at ZDNet, and they continue to bring in most of the company's income. Yes, sales of Windows slipped, but Office 2010 really "picked up the slack." The real question now is: If or when that Office business starts to fall off, "will there be new Microsoft cash cows lined up to provide the milk?"
"Why two Microsoft cash cows are better than one"

And Microsoft is lagging where it really counts: The software giant remains a force — and it "is still a moneymaking machine" — but these "results show that it no longer sets the tech agenda," says Preston Gralla in Computerworld. The Windows operating system has a weak presence in the tablet and smartphone markets, and that doesn't look like it will change in the near future. "Tablets, phones, and online are the future — and Microsoft is lost in all three areas."
"Microsoft's quarterly earnings show its worldwide dominance is waning"

 

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