A huge write-down of its Nokia smartphone business acquisition (to the tune of $7.5 billion) is the culprit for the negative news surrounding the company’s latest results; as of this writing, shares are down almost 3 percent in after-hours trading despite the company narrowly beating analysts’ revenue estimates.
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Microsoft has shifted focus away from PCs and toward cloud services since Satya Nadella took helm as CEO previous year. The company is on the verge of launching its newest operating system Windows 10 on July 29.
The stronger U.S. dollar had a significant impact on results during the most recent quarter, noted Microsoft CFO Amy Hood, who anticipates this will continue to affect financial results throughout fiscal year 2016.
Sales of Windows to businesses fell 21 percent from the year-earlier quarter, when demand for the operating system had surged after Microsoft discontinued support for Windows XP.
Commercial cloud does not include cloud-hosting revenues, nor does it include Office 365 consumer subscriptions (Office 365 Home, Office 365 Personal – which between them added three million more subscribers this quarter, for a total of 15.2 million).
As for its outlook for the first quarter of fiscal year 2016, Microsoft expects its revenue for phone hardware to be around $900 million.
According to analysts at Wall Street, Microsoft Corp was seen to report 56 cents a share earnings, excluding the Nokia write-off, on $22.06 billion in total sales.
And the Phone Hardware business had its own dip of $748 million in revenue, or 38%, because fewer people are buying Microsoft phones, and those that do are buying cheaper phones.
With Microsoft reporting earnings of 62c per share, adjusted to leave out the $8.4bn charges, it would appear that the company surpassed expectations.
Revenue fell 5 per cent to US$22.18 billion.
“Our approach to investing in areas where we have differentiation and opportunity is paying off”, Nadella said.
Microsoft says its commercial revenue had a slight increase at four-percent, reaching $13.5 billion.
However, Microsoft is optimistic about the PC market as it preps up for the launch of Windows 10. The company has, however, pledged to plough on, stating that it has no intention to leave the mobile market in the near future and making convergence a major string in its Windows 10 bow.
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Server products and services revenue grew 4%, with stable annuity performance offsetting declines in transactional revenue. Cloud revenue was up by 88% as sales from cloud programs soared by 36% to $3.08 billion.
