An accounting charge wiped out Microsoft Corp’s profit for the past quarter, leading to its largest loss ever, the company said on Tuesday, making clear the cost of its missteps in the mobile business.
The US$7.5 billion accounting charge, stemming from Microsoft’s troubled acquisition of Nokia Oyj’s cellphone business, was disclosed by the company earlier this month, along with plans to eliminate 7,800 jobs, mostly in the company’s phone operations.
In the quarter ended on June 30, Microsoft said its net loss was US$3.2 billion, or US$0.40 a share, compared with net income of US$4.61 billion, or US$0.55 a share, during the same period last year.
For the full year, Microsoft had a profit of US$12.19 billion, or US$1.48 a share, down from US$22.07 billion, or US$2.63 a share, the previous year.
Revenue for the quarter fell 5 percent to US$22.18 billion. For the full year, revenue rose to US$93.58 billion from US$86.83 billion.
Microsoft’s shares fell about 4 percent in after-hours trading, though some analysts sounded a relatively positive note about the company’s results.
After excluding charges related to its Nokia acquisition, which totaled US$8.4 billion including expenses related to the job cuts, Microsoft said it earned US$0.62 a share, better than the US$0.56 a share average of analyst estimates compiled by Thomson Reuters.
However, investors seemed to mostly look beyond Microsoft’s struggles in the phone market. They appeared to focus on two of the company’s most important businesses, Windows and Office, which showed some signs of weakness.
Microsoft’s biggest challenge is a PC market left limping by the rise of mobile devices. The company has tried to adjust to that new reality partly by transitioning its traditional software franchises, like Office, to become cloud services that customers subscribe to rather than purchase outright. That change results in lower revenue in the near term, as the company spreads out customer payments over time.
Microsoft said that revenue from its devices and consumer business declined 13 percent to US$8.7 billion, in part because the licensing revenue it gets from selling its Windows operating system to PC makers declined 22 percent.
That drop is partly because of PC makers, especially in the consumer market, limiting the amount of inventory in stores ahead of the introduction of Windows 10, a new version of the operating system that is to be released next week.
Microsoft chief executive Satya Nadella said in a phone call with analysts on Tuesday that he believed the company’s new operating system would “return Windows to growth.”
For the first time the company will give away its Windows 10 to existing customers, hoping to motivate millions of people to put the new software on their PCs quickly.
While the company’s stumbles in smartphones have shown the bruising downsides of the hardware business for Microsoft, it had success with other devices, including its Surface tablet, whose revenue grew 117 percent to US$888 million.
Revenue from its Xbox game business rose 27 percent, while that from the commercial cloud business grew 88 percent during the quarter, one of the brightest spots in its results.
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