Published: Sun, October 25, 2015
Economy | By Melissa Porter

Microsoft's earnings would have looked terrible under the old reporting scheme

Microsoft's earnings would have looked terrible under the old reporting scheme

The software release is free to users of Windows 7 and 8.1 for the first year, meaning Microsoft will depend on hardware sales pushing Windows revenue now more than ever. Search contributed more than $1 billion to Microsoft's first quarter for fiscal 2016, said Chief Financial Officer Amy Hood during the company's October 22 earnings call.

Microsoft did well in its Intelligent Cloud business, which includes Azure, server products, app and device management, and cloud-based identity and access management services, reaching $5.9 billion in revenue.

Analysts had expected Microsoft to deliver quarterly earnings of 59 cents per share on $21.03 billion in revenue, according to consensus estimates by Thomson Reuters.

Microsoft stated that Office consumer revenue declined 13 percent-nine percent being a function of the strong dollar in relation to other global currencies.

This marked Microsoft's first earnings report under its new reporting structure, something analysts have been looking forward to. Nadella said that the commercial cloud group's annualized run rate is around $8.2 billion. However, revenue from the Surface division also slowed down, coming in at only $672 million compared with $908 million a year earlier, when customers were flocking to the newly introduced Surface Pro 3.

More personal computing was Microsoft's largest segment, generating $9.4 billion in sales. Microsoft noted it performed better than the overall PC market, "as the Windows 10 launch spurred PC ecosystem innovation and helped drive hardware mix toward premium devices", the company noted in its earnings statement.

The company's net income rose to $4.62 billion in the quarter, from $4.54 billion a year ago. The More Personal Computing segment had a 6% Windows OEM revenue decrease, along with a whopping 54% Phone constant currency revenue decline.

David Lavenda, VP of product strategy at Microsoft partner, sees Redmond's big switch towards Office 365 "spot on". Its consumer subscribers rose to 18.2 million, indicative of a 3-million increase this quarter.

Microsoft continues to confound the pessimists who proclaim that its demise in the age of mobile computing and BYOD is just around the corner. Intelligent Cloud includes most of Microsoft's cloud and server products, such as Azure, Windows Server, and SQL Server.

Microsoft credited that smaller dip to the success of Windows 10; the company has already announced that the system, released at the end of July, had the fastest adoption of any in its history.

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