Microsoft's sales beat estimates, but earnings hit by Nokia deal
In Satya Nadella's first full quarter as CEO, Microsoft posts an 18 percent revenue gain. But earnings per share get dinged by costs related to the acquisition of Nokia's handset business.
Microsoft on Tuesday reported $23.38 billion in revenue in its fiscal fourth quarter, slightly better than the consensus estimates on Wall Street. But the company's earnings took a hit because of Microsoft's acquisition of Nokia's handset business in April, as it posted 55 cents per share. Expenses related to the Nokia deal accounted for 8 cents per share.
Analysts polled by Thomson Reuters expected Microsoft to post earnings of 60 cents a share and revenue of around $23 billion for the period ended June 30.
The stock is bouncing around in after-hours trading as analysts and investors hope for more clarity from the company conference call slated for this afternoon. Coming into today's earnings, there was some confusion on Wall Street about what to expect as Microsoft begins to count up the costs associated with its controversial Nokia deal.
The questions may likely linger. Even though Microsoft said that the Nokia business accounted for nearly $2 billion in revenue in the quarter, it also accounted for a $692 million operating loss.
Last week CEO Satya Nadella disclosed that Microsoft planned to cut up to 18,000 jobs, many of which are related to overlaps created by the Nokia acquisition.
In the quarter, Microsoft had net income of $4.61 billion, or 55 cents a share, compared to $4.97 billion, or 59 cents a share, during the year-earlier quarter. Revenue rose 18 percent to $23.38 billion.
The just-concluded reporting period also marks the first full financial quarter for Nadella, who replaced Steve Ballmer as CEO in February.
"We are galvanized around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution," said Nadella, in a prepared statement. "I'm proud that our aggressive move to the cloud is paying off -- our commercial cloud revenue doubled again this year to a $4.4 billion annual run rate."
Indeed, the company's enterprise business finished the quarter strongly. Microsoft said that revenue from its commercial cloud group rose 147 percent with a run rate exceeding $4.4 billion. The company's server products business, which includes Azure, rose 16 percent. It also signed up another 1 million subscribers for Office 365, one of the main pillars of Microsoft's business.
But management may face more questions about demand for its mainstay operating system. Windows OEM revenue increased just 3 percent. Microsoft said that Windows OEM Pro revenue increased 11 percent while Windows OEM non-Pro revenue fell 9 percent.
The Xbox business did well for Microsoft, climbing 14 percent, or $104 million, in the quarter. Microsoft said that it sold 1.1 million consoles in the fourth quarter. Microsoft also said that its Bing search business revenue grew 40 percent, though it didn't get more specific. Both of those businesses have figured in speculation about whether Microsoft plans to sell them off. In an interview with CNET earlier this month, Nadella argued that he considered both areas to be strategically important to Microsoft.