Microsoft, posting revenue gains, eyes number three smartphone position

Microsoft enjoyed revenue growth across all business segments during its first fiscal quarter of 2012, it announced yesterday. But with sales of Windows Phone handsets still modest, it was many of its Business Division products — including Office, SharePoint, Exchange, Lync and Office 365 — server segment and Xbox offerings that helped push the company to record first-quarter revenue of $17.37 billion, for 7% year-on-year growth.

"Our product portfolio is performing well, and we’ve got an impressive pipeline of products and services that positions us well for future growth,” said Microsoft CFO Peter Klein.

Despite so-far modest smartphone sales, Klein said that Microsoft's increasing integration between handsets, Xbox units, televisions and PCs, as well as its new feature-rich "Mango" release of the Windows Phone platform, the division is well positioned for future success.

"With Nokia, Samsung and other devices coming to market," Klein said during the earnings call, "we are well positioned to become the third mobile ecosystem."

Also expected to insert some oomph is its recent acquisition of Skype (CP: Microsoft's Skype deal official, let the games begin). More than 170 million people rely on Skype monthly, said Klein. Microsoft is hoping that these fans, along with those of Xbox LIVE, can draw consumers away from RIM's BlackBerry and earn it that third ring behind Google and Apple.

"Now that the deal is closed, we are starting the integration of Skype’s world-class services and global-networked platform across our portfolio of products and services including Lync, Windows Live Messenger, Windows Phone and the Xbox platform," said Klein. "Together, we will redefine social and real-time communications for consumers and businesses around the world."

Still, Microsoft's patent portfolio assures that even when consumers choose Android handsets, Microsoft gets a cut. Samsung was the most recent manufacturer to sign a patent cross-licensing agreement with Microsoft. While it's widely noted that HTC pays Microsoft $5 for each Android phone it activates, Microsoft has been tight-lipped about the terms of its agreement with Samsung, and remained so on the call.

"We haven't announced any of the specific terms of the deal. We talked conceptually about the deal and we're super excited about their commitment to the platform and all of that ... is included in the Entertainment and Devices division."

The Entertainment and Devices division brought in revenue of $1.96 billion during the quarter, up from $1.80 during the same quarter a year ago. Though operating income for the segment was $352 million, down from $386 million a year ago.