Microsoft Beats Estimates as Windows Makes a Stand

SEATTLE — Microsoft is facing some of the biggest challenges in its history with the rise of smartphones and the iPad, but one of its stalwarts of the personal computer era showed there is still life left in its main business.
Microsoft said Thursday that sales of its flagship software product for PC, the Windows operating system, rose 4 percent in the quarter. Analysts were expecting a drop in the business because of broader industry data showing weakness in the personal computer business. Gartner, a technology research firm, recently estimated that worldwide PC shipments had grown only 1.9 percent in the quarter.
There is speculation within the technology industry that the supremacy of the PC is over and that Microsoft’s influence is waning along with it. Executives at Apple have boasted that the explosive growth in sales of the iPad and the iPhone are evidence of the arrival of a post-PC era.
During the final three months of last year, Microsoft had a drop in overall sales from Windows, at least partly because of the Apple iPad, which sapped sales of low-end laptop computers. In its most recent quarter, sales of Windows PCs to consumers suffered because of the iPad.
Big business customers, though, picked up the slack, showing how Microsoft’s products are entrenched within one of the most lucrative sectors of the technology market.
“It was nothing to get superexcited about, but relative to what we were experiencing, it’s better than a poke in the eye,” Rick Sherlund, an analyst at Nomura Securities, said of the Windows sales.
Another indication of that strength was a 14 percent increase in sales in Microsoft’s server and tools business, which includes databases and other software products for businesses.
“We are very pleased with the way businesses are investing in technology,” Peter Klein, Microsoft’s chief financial officer, said in an interview.
Microsoft reported a decline in net income to $5.11 billion, or 60 cents a share, compared with $5.23 billion, or 61 cents a share, in the same period a year ago. That decline was mainly due to a tax benefit of $461 million that Microsoft received last year, without which net income would have increased year over year.
Revenue rose to $17.41 billion, from $16.43 billion a year ago.
While its core franchises, Windows and Office, continue to generate profits for the company, Microsoft is struggling to adapt to some of the deeper changes in the technology industry in recent years, especially the shift to mobile devices.
Apple, Microsoft’s longtime rival, has been the biggest beneficiary of that transition and, indeed, has led it, with products like the iPhone and iPad. As a result, Apple now has a market value more than twice that of Microsoft.
Microsoft is preparing to respond to the iPad with Windows 8, a new version of its operating system that has been overhauled to take better advantage of touch-screen devices. That product is not expected to be released to PC manufacturers until late this year, at the earliest.
An earlier Microsoft effort to counter the iPhone has not yet borne fruit. For more than a year, the company has been offering its Windows Phone operating system for smartphones, with little success. More recently, phones from the Finnish cellphone giant Nokia with Windows Phone software, including the Lumia 900, have hit the market to generally positive reviews.
Microsoft does not reveal sales figures from its mobile phone software business. In a sign of the difficulties Microsoft still faces in the mobile market, its most important partner in the mobile business, Nokia, said Thursday that sales of its new Lumia phones had been “mixed,” with better results in the United States than in other markets like Britain.
While Microsoft has been able to point to its video game business in recent years as proof of its grasp of consumer technologies, that division’s sales dropped 16 percent, to $1.62 billion, in the quarter because of a “soft gaming-console market,” Microsoft said in a statement.
The company had been on a roll, with strong sales of the Kinect, a sensor device that allows people to play Xbox games without holding a traditional controller.

But the traditional games business this year has not shown as much innovation as in the recent past, said Mr. Sherlund, the analyst, who speculated that the Xbox could be experiencing more competition from games on Facebook and mobile devices like the iPad.