 "Microsoft profit and revenue fall, but cloud computing grows")
Satya Nadella has put cloud computing at the centre of Microsoft's strategy. It is a move that looks to be paying off, at least in the eyes of investors.
On Thursday the company said its revenue and profit fell in the last quarter. But it mattered little, as Microsoft made more from cloud computing, and its stock jumped more than five per cent immediately after the numbers were released.
The results underscored the good and bad trends that have come to characterise Microsoft's financial results in recent years. On the negative side, there is the floundering personal computer business, which is hurting profits from longtime Microsoft software businesses, especially Windows. On the positive, the company's cloud business keeps growing, giving investors hope that Microsoft will remain relevant for years to come.
The success of Microsoft's cloud business under Nadella, its new chief executive, has put the company's stock back in favour with investors. Even with recent anxiety in the stock market, Microsoft's shares are up more than 28 per cent for the last year, while shares in rivals like Apple, Oracle and IBM have declined by double digits.
By most analysts' estimates, Microsoft is in second place in the most prominent segment of the cloud services market - in which computer storage and other services in data centres are rented to customers - after Amazon. IBM and Google are next.
For its second fiscal quarter, which ended on December 31, the company reported net income of nearly $5 billion, or 62 cents a share, compared with $5.86 billion, or 71 cents a share, during the same period a year earlier.
Revenue fell to $23.8 billion, down from $26.47 billion a year ago. The figures in the recent quarter reflected a huge deferral of revenue, almost $1.9 billion, related to Windows 10, the company's latest operating system. Although it collects all the cash up front from selling the software to PC makers and others, accounting rules dictate that the company has to spread its recognition of the money over the life of the product.
Without that deferral, Microsoft had $25.69 billion in revenue and 78 cents a share in earnings, better than the average forecast of analysts surveyed by Thomson Reuters of 71 cents a share in earnings and $25.26 billion in revenue.
Even without the Windows deferral, Microsoft's numbers declined from the previous year, in large part because the company in July sharply scaled back the ambitions of its money-losing smartphone business, acquired from Nokia. The company's phone revenue plummeted 49 per cent when excluding foreign currency fluctuations as a result of the changes, which included cutting the number of smartphones it sells.
Microsoft's cloud business encouraged investors. The company's intelligent cloud group, which includes its Azure service, rose five per cent to $6.3 billion. It now has 20.6 million consumer subscribers to Office 365, the cloud version of its productivity applications, up from 9.2 million a year earlier.
Last July, Microsoft introduced Windows 10, raising some hope in the industry of a rebound in PC sales. That rebound has not materialised yet. Global shipments of new PCs declined 8.3 per cent during the fourth quarter compared with a year earlier, the research firm Gartner recently reported.
The revenue Microsoft gets from PC makers for Windows declined 5 per cent in the quarter, excluding foreign currency impacts. Revenue from its own Surface line of computers and tablets rose to $1.35 billion from $1.1 billion a year earlier.
The company no longer charges most customers to upgrade existing computers to Windows 10, hoping to get as many people as possible running the latest operating system and wooing developers back to Windows. The company has lost considerable influence among developers, who have gravitated to Apple's iOS and Google's Android operating systems.
In a phone interview, Amy Hood, Microsoft's chief financial officer, said Microsoft was not yet predicting a turnaround in the PC market.
"Our expectation for the PC market is roughly in line with most analysts," Hood said. "For the next year, we understand the market is not likely to grow, but we can still grow."
©2016 The New York Times News Service
On Thursday the company said its revenue and profit fell in the last quarter. But it mattered little, as Microsoft made more from cloud computing, and its stock jumped more than five per cent immediately after the numbers were released.
The results underscored the good and bad trends that have come to characterise Microsoft's financial results in recent years. On the negative side, there is the floundering personal computer business, which is hurting profits from longtime Microsoft software businesses, especially Windows. On the positive, the company's cloud business keeps growing, giving investors hope that Microsoft will remain relevant for years to come.
The success of Microsoft's cloud business under Nadella, its new chief executive, has put the company's stock back in favour with investors. Even with recent anxiety in the stock market, Microsoft's shares are up more than 28 per cent for the last year, while shares in rivals like Apple, Oracle and IBM have declined by double digits.
By most analysts' estimates, Microsoft is in second place in the most prominent segment of the cloud services market - in which computer storage and other services in data centres are rented to customers - after Amazon. IBM and Google are next.
For its second fiscal quarter, which ended on December 31, the company reported net income of nearly $5 billion, or 62 cents a share, compared with $5.86 billion, or 71 cents a share, during the same period a year earlier.
Revenue fell to $23.8 billion, down from $26.47 billion a year ago. The figures in the recent quarter reflected a huge deferral of revenue, almost $1.9 billion, related to Windows 10, the company's latest operating system. Although it collects all the cash up front from selling the software to PC makers and others, accounting rules dictate that the company has to spread its recognition of the money over the life of the product.
Without that deferral, Microsoft had $25.69 billion in revenue and 78 cents a share in earnings, better than the average forecast of analysts surveyed by Thomson Reuters of 71 cents a share in earnings and $25.26 billion in revenue.
Even without the Windows deferral, Microsoft's numbers declined from the previous year, in large part because the company in July sharply scaled back the ambitions of its money-losing smartphone business, acquired from Nokia. The company's phone revenue plummeted 49 per cent when excluding foreign currency fluctuations as a result of the changes, which included cutting the number of smartphones it sells.
Microsoft's cloud business encouraged investors. The company's intelligent cloud group, which includes its Azure service, rose five per cent to $6.3 billion. It now has 20.6 million consumer subscribers to Office 365, the cloud version of its productivity applications, up from 9.2 million a year earlier.
Last July, Microsoft introduced Windows 10, raising some hope in the industry of a rebound in PC sales. That rebound has not materialised yet. Global shipments of new PCs declined 8.3 per cent during the fourth quarter compared with a year earlier, the research firm Gartner recently reported.
The revenue Microsoft gets from PC makers for Windows declined 5 per cent in the quarter, excluding foreign currency impacts. Revenue from its own Surface line of computers and tablets rose to $1.35 billion from $1.1 billion a year earlier.
The company no longer charges most customers to upgrade existing computers to Windows 10, hoping to get as many people as possible running the latest operating system and wooing developers back to Windows. The company has lost considerable influence among developers, who have gravitated to Apple's iOS and Google's Android operating systems.
In a phone interview, Amy Hood, Microsoft's chief financial officer, said Microsoft was not yet predicting a turnaround in the PC market.
"Our expectation for the PC market is roughly in line with most analysts," Hood said. "For the next year, we understand the market is not likely to grow, but we can still grow."
©2016 The New York Times News Service