Microsoft Results Impress Despite Profit Squeeze

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Microsoft beats Wall Street expectations, but profits still feel the impact of restructuring and Nokia buy

Microsoft’s bottom line continues to feel the pain from Redmond’s restructuring costs and the acquisition of Nokia’s handset business earlier in the year.

That said, the first quarter FY15 results from Microsoft still surpassed analyst expectations, as the company benefited from its ongoing cloud momentum, coupled with strong sales of its Lumia phones and Surface tablets.

Financial Results

For the period ending September 30, Microsoft’s profit fell 13 percent to $4.5bn (£2.8bn) or 54 cents (£0.34) per share, down from $5.2bn (£3.3bn) or 62 cents (£0.39) per share in the same year-ago quarter. That easily beat Wall Street expectations of 49 cents (£0.30) per share.

SurfacePro3 headMicrosoft profits in the quarter were hurt by an expected $1.1bn (£686m) restructuring charge when the company announced in July that 18,000 staff would lose their jobs in the next 12 months, mostly from the Nokia handset division.

But overall the results looked promising, helped by the fact that sales rose 25 percent to £23.2bn (£14.4bn) from $18.5bn (£11.5bn) a year earlier, helped by the Nokia unit. That again beat expectations, as Wall Street had predicted an average estimate of $22bn (£13.7bn).

“We are innovating faster, engaging more deeply across the industry, and putting our customers at the centre of everything we do, all of which positions Microsoft for future growth,” said Microsodft CEO Satya Nadella. “Our teams are delivering on our core focus of reinventing productivity and creating platforms that empower every individual and organisation.”

Microsoft said that revenues had been helped by stronger sales of its Lumia phones, as well as its Surface tablets and cloud computing products.

Indeed, Microsoft revealed that it had sold 9.3 million Lumia smartphones in the first quarter, a rise of 5.6 percent, which meant it posted phone hardware revenue of $2.6bn (£1.6bn).

And sales of its Surface tablet more than doubled to $908 (£566m) from $400m (£249m) in the year-ago quarter.

Cloud revenues were not revealed, but Redmond confirmed that commercial cloud sales rose 128 percent, while sales of services based on its Azure cloud platform rose 121 percent.

“We delivered a strong start to the year, with continued cloud momentum and meaningful progress across our device businesses,” said CFO Amy Hood.

Xbox sales meanwhile rose 102 percent and Microsoft added 25 percent more Office 365 Home and Personal subscribers.

Microsoft’s company transition thus seems to be on track, as it seeks to aggressively cut costs. CEO Nadella has also pledged to turn Microsoft into a “mobile-first, cloud-first” company going forward.

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Author: Tom Jowitt
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