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In the quarter where Microsoft announced plans to acquire Nokia’s Devices & Services business, it reported total revenue of $18.53 billion for the quarter ended September 30, 2013 (Q1-FY14), up 16% year on year (YoY) from $16 billion revenue in the corresponding quarter last year.

The operating income was at $6.33 billion for the quarter, up 19% YoY from $5.31 billion in the same quarter last year while the net income was at $5.24 billion for the quarter, up 17.23% from $4.47 billion in the same quarter last year.

Highlights

– Microsoft sold 1.2 million Xbox 360 consoles during the quarter, up from 1 million in the last quarter.

– Microsoft unveiled two new Surface models – Windows RT 8.1 based Surface 2 and Windows 8.1 Pro based Surface Pro 2.

– Microsoft, AOL and Yahoo agreed to work together to improve the programmatic buying of premium ad inventory for advertisers, by developing a common set of API specifications which is expected to be available in the coming months.

– Microsoft launched iOS and Android apps for Xbox Music and introduced free ad-supported music streaming on the web.

– Bing.com partnered Fox News to integrate its Bing Pulse online voting tool to Fox News Channel’s ‘Special Report with Bret Baier’ program, enabling viewers share their opinions and reactions to news commentary in real time on Bing Politics.

– Microsoft released a new transparency report, in which it disclosed that it had received a total of 321 requests for disclosure of 515 users & accounts from the Indian government in first six months of 2013.

– Microsoft CEO Steve Ballmer announced his retirement within the next 12 months. The company is yet to choose his successor.

– As said earlier, Microsoft announced its plans to acquire Nokia’s Devices & Services business for €3.79 billion, license Nokia’s patents for €1.65 billion and license & use Nokia’s mapping services HERE. The transaction is expected to close in this quarter (Q1-FY14), subject to approvals. (More on that here).

– Microsoft tied up with Gameloft to launch 15 game titles on Windows 8 and Windows Phone 8 over the next year.

Financials

Following a company restructuring in July 2013, Microsoft has changed its reporting structure starting this fiscal. It will now report its performance in five segments across two broad divisions – Devices & Consumer (Licensing, Hardware and Others) and Commercial (Licensing and Others).

Devices & Consumer

The total devices & consumer revenue was at $7.46 billion for the quarter, up 4% YoY. It accounts for 40.3% of Microsoft’s consolidated revenues for the quarter.

Licensing: The devices & consumer licensing revenue was at $4.34 billion for the quarter, down from $4.68 billion in Q1-FY13.  Licensing revenue comprises of revenues from its Windows division (OEM and non-volume licensing), Non-volume licensing of Microsoft Office, Windows Phone and certain patent licensing revenue.

The company mentioned that its Windows OEM revenue declined by 7% YoY while its Windows Pro revenue grew for the second consecutive quarter.

Hardware: The devices & consumer hardware revenue was at $1.49 billion for the quarter, up from $1.08 billion in Q1-FY13. Hardware revenue comprises of Xbox 360 console sales, Xbox LIVE subscriptions, Surface sales, second-party and third-party video games and sale of Microsoft PC accessories.

Surface registered sequential revenue growth to $400 million for the quarter and a sequential growth in the number of units sold, although it didn’t disclose any specific numbers.

Other Revenues: The devices & consumer other revenues were at $1.64 billion for the quarter, up from $1.4 billion in Q1-FY13. Other revenues comprises of search advertising revenues, resale revenues (Windows Store, Xbox LIVE transactions, and the Windows Phone Marketplace), subscription revenues (Office 365 Home premium), Studio revenues (first-party video games), retail stores and consumer products & services not included in the categories above.

Office 365 Home Premium has clocked more than 2 million subscriptions, doubling from 1 million subscriptions in May 2013. Search advertising revenue also grew 47% due to an increase in revenue per search and search volume.

Commercial

The total commercial revenues grew 10% YoY to $11.20 billion for the quarter. It accounts for around 60% of Microsoft’s consolidated revenues for the quarter.

Licensing: The commercial licensing revenues was at $9.6 billion for the quarter, up from $8.9 billion in Q1-FY13. Commercial Licensing revenues comprises of Server products (Windows Server, Microsoft SQL Server, Visual Studio, System Center, and Windows Embedded), Volume licensing of Windows, Microsoft Office for business (includes Exchange, SharePoint, and Lync), Microsoft Dynamics business solutions (excluding Dynamics CRM Online and Skype).

The company noted that SQL Server saw a double digit revenue growth, with SQL Server Premium revenue growing more than 30%. Lync, SharePoint, and Exchange also collectively saw a double digit growth.

Other: The commercial other revenues was at $1.6 billion for the quarter, up from $1.25 billion in Q1-FY13. Commercial other revenues comprises of Enterprise Services (Premier product support services and Microsoft Consulting Services), Online Services (Office 365 excluding Office 365 Home Premium and other Microsoft Office online offerings, Dynamics CRM Online), Windows Azure, and commercial products & services not included in the categories above.

Download: Press Release | Financials | Slides