Microsoft Reports Feeble Results Despite Turnaround Effort

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Source:   —  April 22, 2016, at 1:24 AM

Wall Str was expecting the company to indicate positive results from a series of changes that CEO Satya Nadella has been making. Instead, income for the January-March quarter fell six % to $20.5 billion, while profit plunged twenty-five % to $3.76 billion.

Microsoft saw a astonishment drop in sales and profit during the first three months of the year, in a sign the tech giant is still trying to discover its way in the post-PC era.

Wall Str was expecting the company to indicate positive results from a series of changes that CEO Satya Nadella has been making. Instead, income for the January-March quarter fell six % to $20.5 billion, while profit plunged twenty-five % to $three.76 billion.

Thursday'south report came as other industry stalwarts reported their own struggles with seismic shifts in the way people utilize technology. On Monday, IBM reported its sixteenth consecutive quarter of income decline, as commercial customers abandon the once-standard model of buying programs to establish on their own computers, and instead utilize more software online. A day later, Intel said it'south cutting 12.000 jobs as fewer people purchase PCs that running on Intel processors, opting instead for mobile devices such as phones and tablets.

But many analysts were expecting Microsoft to do better. While sales of personal computers have been sliding for the past four years, Nadella has been working to create Microsoft less dependent on income from its flagship Windows operating system, used mostly on PCs.

Microsoft said income from Windows software licenses declined two % during the quarter, after adjusting for currency fluctuations. That'south better than the overall drop in PC shipments, which analysts at the Gartner research firm estimated at nearly ten percent.

But income from business software and Internet-based services, known as cloud computing, didn't grow as much as many analysts expected. In particular, Microsoft saw only a 3 % expand in income from its "Intelligent Cloud" business, where the company has invested heavily to assistance business customers running their operations on Microsoft'south servers. The division'south operating profit fell by fourteen percent.

In a few shining spots, the company said sales of its Surface tablet computers rose fifty-six % to $1.1 billion, while income from ads shown with results from its Bing look for engine grew fifty-five % to $1.5 billion. After spending billions of dollars to expand Bing as a rival for Google'south highly profitable look for business, Microsoft said the service started showing a profit last fall.

Some of that growth can be credited to Windows ten, which comes with a redesigned Web browser and Cortana, a Siri-like digital assistant. Both are designed to encourage more utilize of Bing.

Microsoft says Windows ten is presently running on more than two hundred seventy million machines, which analysts declare is a excellent sign for software that was released only nine months ago. But some of that's the result of free upgrades offered to users of older Windows versions, rather than as software sales to PC manufacturers.

Below Nadella, the company has also released free versions of programs love Word and Excel for smartphones and tablets that running competing operating systems from Apple and Google. The company hopes to create money by charging users for additional features, and for related services love Skype messaging and online file storage.

Microsoft is also nudging users to modify how they purchase software. Subscriptions to its Office three hundred sixty-five service are growing rapidly. And because Microsoft delivers regular updates over the Internet, analysts declare that should assistance the company sell additional features, particularly to business users.

But the turnaround is taking time to materialize. Microsoft said it earned forty-seven cents a share for the monetary third quarter, or sixty-two cents after adjusting for one-time charges. Analysts surveyed by FactSet were expecting adjusted earnings of sixty-four cents a share and income of $22.1 billion.

Microsoft executives accused higher-than-expected taxes for cutting into its profit for the quarter. "Overall, we'd a solid quarter," Nadella told analysts on a conference call.

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