MSFT Microsoft Corporation

By Jay Greene 

A sharp increase in cyberattacks gave Microsoft Corp.'s ubiquitous Windows operating system the kind of lift it hasn't seen in years, as fears of getting hacked prompted companies to upgrade their computers faster than they otherwise might have.

When the software giant reported quarterly earnings last week, it surprised several analysts, notching an 11% jump in sales of Windows 10 licenses for computers sold primarily to corporate customers, from a year earlier. Bulk sales of Windows licenses and related cloud services, meanwhile, jumped 21%. Windows 10 is Microsoft's most-current version of its operating system and used widely in computers world-wide.

Cyberattacks plagued corporations last summer, rendering PCs running older and unpatched version of Windows useless, leading some corporate tech buyers to upgrade.

The increases were especially notable, analysts say, because personal-computer shipments world-wide had no growth in the same period, according to International Data Corp. Also, sales growth in the unit that houses Windows, called More Personal Computing, had been moribund for years.

What's more, Microsoft said revenue for the segment that includes Windows, an aging franchise whose epitaph has been regularly written, is expected to grow about 13% in the current quarter. The optimistic forecast for Windows comes as the company is downgrading the operating system's importance.

Cedars-Sinai Health System in Los Angeles is close to completing its upgrade of nearly 20,000 computers to the nearly three-year-old Windows 10, said Darren Dworkin, the system's chief information officer. Although the upgrade didn't come about because of cyberattacks, Mr. Dworkin said he is worried about them.

"There are more reasons now for wanting to keep current," Mr. Dworkin said.

The number of data breaches in the U.S. jumped 45% to 1,579 in 2017, according to the nonprofit Identity Theft Resource Center and data-security firm CyberScout. That is one reason why companies and government agencies such as the United Kingdom's Department of Health and Social Care are upgrading at a brisk pace.

The WannaCry and Petya cyberattacks in 2017 highlighted glaring vulnerabilities of older and inadequately patched versions of Windows. The attacks, which locked digital files and demanded payment for them to be released, disrupted operations at the British health agency as well as car factories in France, a law firm in the U.S. and elsewhere.

In targeting older Windows versions, those attacks helped boost Windows 10 sales. The last time Windows registered comparable quarterly growth was during the "upgrade cycle" for Windows XP, a version of the operating system that made its debut in 2001, a spokeswoman said.

Microsoft, which doesn't disclose dollar figures for Windows revenue, recorded 11% growth in sales of Windows licenses for devices sold primarily to corporate customers in the quarter ended June 30, 2014, as the company's support for Windows XP neared its end. Support for Windows 7, which many corporations still use, ends in January 2020.

Windows also benefits from being the operating system of choice for corporate customers, said Patrick Moorhead, an analyst with the research firm Moor Insights & Strategy. Some version of the operating system is on 88% of the world's desktops and laptops connected to the web, according to analytics website NetMarketShare.

"There's not an easy replacement for the Windows PC," Mr. Moorhead said.

One reason for Microsoft's upbeat expectations for the current quarter is that even though there are nearly 700 million devices -- mostly PCs but tablets, Xbox machines and other devices -- running Windows 10, there are another 800 million devices running older versions.

(END) Dow Jones Newswires

May 03, 2018 11:14 ET (15:14 GMT)

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