Microsoft today posted its earnings results for the fourth quarter of financial year 2011. Revenue was $17.37 billion, a record for the fourth quarter, 8 percent higher than the same period last year. Operating income and net income were $6.17 billion and $5.87 billion, increases of 4 percent and 30 percent year on year, and earnings per share were 69¢, a 35 percent increase on the fourth quarter of 2010.

For the year as a whole, revenue was $69.94 billion, up 12 percent on 2010, with operating income and net income of $27.16 billion and $23.15 billion, representing growth of 13 percent and 23 percent respectively. Earnings per share rose 28 percent, to $2.69.

The year's biggest success story was the Entertainment and Devices Division, the group that incorporates Xbox 360, Xbox Live, and Windows Phone. Quarterly revenue was $1.49 billion, up 30 percent year over year, as the division continues to be buoyed by the strength of Xbox 360 and Kinect. For the year as a whole, revenue was up 45 percent over 2010 to $8.91 billion.

Microsoft Business Division, the group whose biggest project is Office, also had a good year. Fourth quarter revenue was $5.78 billion, up 7 percent year on year, with annual revenue of $22.19 billion, an increase of 16 percent. Office 2010 continues to be the fastest-selling version of Office of all time, with more than 100 million licenses now sold. With the recent launch of Office 365, the Business Division is now making a strong push into the cloud market, too.

Server and Tools posted strong figures with revenue for the quarter of $4.64 billion, up 12 percent year on year, and full year revenue of $17.10 billion, up 11 percent for the year. This growth was attributed to Windows Server, System Center, and SQL Server.

Online services revenue grew by 17 percent year on year to $662 million for the quarter. Full year revenue was $2.56 billion, up 15 percent. The growth came on the back of a 20 percent increase in advertising revenue, primarily driven by search. The division continues to make losses, however, and in spite of the revenue growth, the losses also grew, up 9 percent to $2.55 billion. Profitability for Online Services remains elusive.

The only division to post a drop in revenue was the Windows and Windows Live division. Revenue for the quarter was $4.74 billion, down 1 percent, and for the year was $19.02 billion, down 2 percent. These figures are impacted by having revenue for Windows 7 booked prior to its launch, with Microsoft estimating that absent those revenue deferrals, full year revenue experienced growth of 2-4 percent, in line with the growth of the PC market. Windows 7 continues to sell well, with more than 400 million licenses sold, and business deployments continuing to accelerate: business PC growth is up 8 percent year on year, offset somewhat by a decline in consumer PCs of 2 percent.

Over the next quarter and year, Microsoft expects Windows and Windows Live revenue will grow in line with the PC market, with the emerging markets and businesses outpacing growth in developing markets and consumers. Business Division transactional (retail/OEM) revenue will lag the PC market, with multiyear license (Software Assurance/volume license) revenue expected to grow in the mid-to-high single digits for the next quarter, and low double digits for the whole year. Server and tools transactional revenue will track the server market, with multiyear licenses and enterprise services expected to grow in the low double digits for both the first quarter of FY 2012 and the whole year. Online Services revenue is expected to track growth in the advertising market. Entertainment and Devices revenue is expected to grow in the high single digits next quarter, and the mid-teens for the year as a whole.

It was overall a great year for Microsoft, with all divisions showing strong revenue numbers and all bar one showing significant growth. Even Windows revenue remained strong, suggesting that for all the talk that is made of tablets, they haven't yet started to make serious inroads on PC sales—and hence Windows sales. Nonetheless, investors can't help but notice the way that Apple has enjoyed such explosive growth in both revenue and profit. Microsoft's gains have been quite modest in comparison. Apple's ability to aggressively enter and subsequently dominate the music player, phone, and now tablet markets has allowed it to enjoy revenue growth of 82 percent, year on year, and profit growth of 121.9 percent. Microsoft is counting on its pact with Nokia to enable it to similarly capitalize on the huge consumer demand for smartphones, but it won't be until the release of Windows 8 that it will have any product to truly compete with the iPad—which means that Apple can expect to remain unchallenged for another year, if not longer.