Microsoft Sees Profit Drop In Sluggish PC Market

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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On the brighter side, Lumia smartphones and Surface tablets show significant growth

Microsoft on Monday reported a drop in profits as its core businesses continue to struggle, an indication of the continued weakness of the global PC market, as the company’s mobile products continue to show growth, boosted by its acquisition of Nokia’s handset operation last year.

The company reported profit of $5.86bn (£3.9bn), or 71 cents per share, for its fiscal second quarter, down from $6.56bn in the same quarter a year ago.

satya nadella microsoft memo square ish

The figures were broadly in line with the expectations of analysts, who had predicted revenues of $26.3bn and earnings of 71 cents per share, on average, according to Thomson Reuters.

Sales rose 8 percent to $26.47bn, largely due to the Nokia acquisition. Microsoft sold a record 10.5 million Nokia Lumia handsets in the quarter, up 28 percent from a year ago and adding $2.3bn to the company’s sales.

The Surface tablet division saw more than $1bn in quarterly sales for the first time, 24 percent up from a year ago. Overall, the Devices and Consumer division rose 8 percent year-on-year to $12.9bn.

However, Microsoft’s software still only runs on 3 percent of phones worldwide, and also remains far behind Apple’s iOS and Google’s Android in the tablet market.

Windows and Office

Such products remain peripheral to Microsoft’s main Windows and Office businesses, which are struggling to adapt to the era of tablets and smartphones.

Microsoft said it expects growth in these core areas, and investors have applauded its restructuring efforts in recent months by pushing shares up to 14-year record highs. Shares fell around 4 percent in after-hours trading on Monday.

The company completed its $7.2bn acquisition of Nokia’s handset business in April of last year, and in July announced it would lay off 18,000 employees, many of them previous Nokia staff. Microsoft said it expects it will continue to incur $100m per quarter in costs related to the acquisition and the layoffs for the remainder of the financial year.

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