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Microsoft reports record quarter despite dip in Windows sales

Microsoft on Thursday reported record sales of $18.5 billion (£11.4 billion) for its fiscal first quarter, with net income jumping by a healthy 17 per cent from a year ago to $5.2 (£3.2 billion) billion.

The Redmond-based company's revenue picture was buoyed by a 10 per cent increase in corporate software sales, a 47 per cent jump in search-related ad sales, and increased sales of Microsoft's Surface tablet after a series of price cuts.

But revenue generated from Microsoft's flagship product, Windows, fell by 7 per cent in the quarter compared with the same period a year ago. Compared with the great success of Windows 7, the company's Windows 8 operating system has proven a disappointment since its release last October.

Microsoft recently released Windows 8.1, an upgrade that addresses many of the criticisms levelled at Windows 8. For its fiscal first quarter, the company deferred $113 million (£69.7 million) in revenue related to pre-sales of Windows 8.1.

Microsoft CEO Steve Ballmer, who is set to step down in less than a year, pointed to Windows 8.1 and other new and soon-to-be-released products as offering good reasons to be bullish on the company going forward.

"Our devices and services transformation is progressing and we are launching a wide range of compelling products and experiences this fall for both business and consumers," Ballmer said in a statement. "Our new commercial services will help us continue to outgrow the enterprise market, and we are seeing lots of consumer excitement for Xbox One, Surface 2, and Surface Pro 2, and the full spectrum of Windows 8.1 and Windows Phone devices."

During an earnings call on Thursday, chief financial officer Amy Hood highlighted Microsoft's booming enterprise business and a commercial cloud portfolio which generated a 103 per cent year-over-year increase in revenue.

"We saw strong focus across our teams, generating record first-quarter revenue even as we navigate a fundamental business transition. Our enterprise renewals were very healthy and our devices and consumer business continued to improve," Hood said. "We are making strategic investments in areas like technological innovation, supply chain management, and global cloud operations to build for the future and create long-term shareholder value."