updated 01:20 pm EST, Mon November 15, 2010
Microsoft said inflating Windows revenue by 259m
Microsoft this weekend was accused of inflating its Windows revenue figures. An SEC filing has shown that the company's record revenues could have boosted Windows revenue by as much as $259 million through diverting sales from the Entertainment and Devices group. Microsoft explained the measure to InformationWeek as part of the "organizational shakeup" from the exit of Robbie Bach that moved embedded devices and Office for Mac to different groups.
Unknowns still surround the shift. The company's multi-touch Surface tables may have helped improve the revenue. It was previously attached to the Entertainment and Devices group but wasn't mentioned in the SEC filing. However, its revenue was unlikely to have had a significant impact as it's primarily limited to hotels, stores and other retail locations.
Regardless of explanations, the additional money combined with the already acknowledged $1.5 billion in Windows 7 pre-order revenue deferrals may have significantly masked actual growth in sales over the past year. Microsoft claimed a 66 percent increase in Windows revenue over summer 2009, but its predominant OEM (preloaded PC install) business saw its sales grow just 11 percent year-to-year. The figure was strictly in line with PC industry growth, and Windows' web share dropped one percent year over year.
The adjusted ratio suggests both that Microsoft hasn't been growing as quickly as implied but also gives greater support to Microsoft GM Gavriella Schuster's assertion that iPads were cannibalizing netbooks and thus slowing down Windows PC sales. Outside of interviews, Microsoft has denied the effect.