Microsoft (MSFT – Get Report) CEO Satya Nadella has completed arguably the most hard quarter during his 18 months at the helm, but a few think the software maker is still on the right track. In the year-earlier quarter, customers were buying PCs ahead of the expiration of support for Windows XP, the company said.
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Microsoft is planning to release the new Windows 10 next week and would have hoped for its consumer division to do better before launch.
And Commercial revenue “increased slightly” to $13.5 billion, with commercial cloud revenue growing by 88 per cent driven by Office 365, Azure and Dynamics CRM Online. Microsoft announced two weeks ago that it was cutting 7,800 jobs to streamline its smartphone hardware business.
“We finished the fiscal year with solid progress against our strategic priorities, through strong execution and financial discipline, which is reflected in our results for the quarter and the year”, Amy Hood, Microsoft’s chief financial officer, said in a statement.
The software giant acquired Nokia’s phone unit in April last year for US$9.5 billion. Microsoft recorded a profit of $4.6 billion in the same quarter a year back.
Adjusted to exclude the charges, the company posted a quarterly profit of 62 cents per share, beating the average estimate of 15 analysts surveyed by Zacks Investment Research of 31 cents per share. The operating loss was $2.1 billion.
Walter Pritchard and Steven Rogers, who research Microsoft for Citigroup, reckon that success for Windows 10 could be a big problem for Microsoft.
As mentioned by Microsoft, total Xbox revenue grew by 27%. Microsoft’s Office business also moved downhill during the quarter.
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. Despite this, the company still has a number of positive developments in the form of product services. The earnings were majorly hurt by a $7.5 billion write-down related to the company’s flopped purchase of the Finnish IT multinational company’s handset division. Microsoft’s computing and gaming hardware revenues improved by 50% (in constant currency), primarily due to 117% improvement in Surface 3 revenues to $888 million.
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On the other hand, Microsoft’s revenue from its highly popular Windows, likewise suffered huge declines, falling 25 percent in the midst of a weakening personal computer market.
