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Microsoft's Q4 beats expectations but profits shrink on poor Surface, Lumia sales

Despite bumper cloud and advertising revenues
Tue Jul 22 2014, 21:55
TechEd 2014 Microsoft logo

MICROSOFT HAS REPORTED its fiscal fourth quarter 2014 financials, revealing that while its quarterly revenues beat expectations, its profits fell short on waning hardware sales.

Microsoft announced revenues of $23.38bn for its fiscal fourth quarter, an increase compared to the $19.9bn the firm posted this time last year and a figure that surpassed analyst expectations. However, profits for the quarter came in at $4.6bn, compared to $4.97bn in the fourth quarter last year, which fell short of Wall Street predictions.

This is likely attributable to stalling hardware sales. While Microsoft didn't give much of a glimpse at Surface performance, it said that revenue for the division came in at $409m for the quarter, down from the $500m the company posted last quarter. This suggests sales of Microsoft's Surface 2 and Surface Pro 2 tablets are stalling, perhaps - but unlikely - as buyers hold out for the Surface Pro 3.

Microsoft also shed some light on Windows Phone performance since its recent takeover of Nokia, and things aren't looking too good. The firm reported Lumia sales of 5.8 million during the quarter, a 21 percent drop compared to the same quarter last year. However, Microsoft noted that these sales figures account for only two of the three months during the quarter.

Financially, Nokia's device business contributed revenue of $1.99bn in the fourth quarter, but also an operating loss of $692 million.

PC sales don't seem quite so bad, although it seems the increase in sales hasn't helped Microsoft quite as much as it did Intel. Microsoft noted a small three percent increase in Windows OEM revenue, which the firm credited to the end of Windows XP support in April. The firm revealed that Microsoft Office Consumer revenue increased 21 percent in the fourth quarter, likely aided by the release of Office for iPad earlier this year.

Microsoft's Cloud department was perhaps its best performing during the quarter, with revenues jumping 147 percent.

Microsoft CEO Satya Nadella was pretty pleased about this growth, saying in a statement, "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.

"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."

Search performed well too, with advertising revenue from the company's Bing search engine growing 40 percent during the quarter, with its overall share of US search rising 19.2 percent. Xbox didn't do too badly either, with revenue from Microsoft's gaming division increasing by $104m, or 14 percent, despite the firm seemingly struggling to compete against the Sony PS4.

Microsoft's fiscal fourth quarter earnings come just days after Nadella announced 18,000 job cuts across the company, with 12,500 staff facing the axe from Microsoft's recently acquired Nokia devices division. µ

 

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