Microsoft Corp (MSFT) has suffered a heavy $7.58 billion write-down in connection to the Nokia buyout earlier this month.
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(Click image for larger view and slideshow.). The strength of the U.S. dollar hurt revenue and earnings in the recent quarter, Microsoft said.
By the numbers Microsoft booked revenue for the quarter of $22 billion, gross margin delivered a figure of $14.7 billion, and the company took a loss of $2.1 billion, or -$0.40 per share. We sold 8.4 million Lumia phones in the fourth quarter compared to 5.8 million in the prior year. Combined, these items totalled $8,4-billion or a $1.02 per share negative impact.
Nonetheless, adjusted earnings for the quarter trumped analysts’ estimates, as did revenues. The company had posted net income of $4.61 billion, or 55 cents per share, a year earlier.
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The company’s device sales, on the other hand, fell 13% to $8.7 billion. Even server products, normally strong performers, were flat year on year; while annuity (subscription) revenue was up, this was offset by a decline in transactional (non-subscription) revenue. The company’s hardware business has been on a rollercoaster forcing the company to cut up to 7,800 jobs as part of a cost-saving strategy. Commercial cloud revenue, in particular, increased by as much as 88% due to Office 365, Azure and Dynamics CRM online. “For more than a year now we’ve seen 50,000 new SMB customers adopt Office 365 every month”. The Surface tablet, Microsoft’s would-be iPad competitor, saw 117 percent revenue growth. Total Xbox revenue gained 27 percent, while search advertising revenue rose 21 percent.
“Our approach to investing in areas where we have differentiation and opportunity is paying off”, Nadella said.
Microsoft plans for Windows 10 to be its last version of Windows before transitioning the business to a fee-for-service model down the road, although how that will work is unclear.
In an earnings call on Tuesday, Nadella said Office 365 remains a stalwart driver of its performance, and the company is looking to spread it to more small and medium-sized businesses.
Devices and Consumer revenue declined 13 per cent, with Windows OEM revenue decreasing 22 per cent as revenue was “impacted” by PC market declines following the XP end-of-support refresh cycle.
Looking ahead, Nadella anticipates continued expansion spurred by Windows 10. With E5, we’ve expanded our market opportunity for Office 365 by more than $50 billion.
Microsoft wants to generate revenue by building search and gaming into the Windows 10 interface, Chief Financial Officer Amy Hood said in April.
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Microsoft is hoping to put the bad news about its mobile phone business behind it as it enters another, potentially important, chapter in its struggle to regain influence in the technology business.
