Microsoft’s Q4 shows positive outlook, despite Nokia acquisition earnings miss
Earlier this week, DeveloperTech posted an opinion piece on why Microsoft's job cuts were smart, but poorly handled. The company's new CEO, Satya Nadella, inherited a powerful company in disarray with many decisions by his predecessor still being settled. Microsoft's Q4 earnings hints gives an indication of how the company is doing since having a new captain at the helm.
One of the biggest decisions was to acquire the once-mighty Nokia handsets business. Whether this will be fruitful in the long-term for Microsoft we cannot predict, but IDC believes Windows Phone's market share will grow to 6.4 percent by 2018. One thing is for certain, without Nokia, Windows Phone would no longer be a contender in a market dominated by Android and iOS.
It was inevitable lay-offs were to occur. Nadella has a very different vision than his predecessor, and had Ballmer still been in charge, it's still not likely that everyone from Nokia was going to find their place at a company already packed with talent such as Microsoft.
Microsoft bought Nokia for an eye-watering $7.2 billion (£4.2bn) alongside many of its assets and approximately 32,000 employees. Salaries at Nokia start at approximately $81,316/year in the US. For some rough maths, all these employees would cost Microsoft over an extra $2.5bn (£1.5bn) for positions which would not be seen as vital in Nadella's new vision for Microsoft.
Revenue beat analysts’ expectations this quarter with revenue of $23.4bn (£13.7bn). It is the company's earnings per share which missed expectations of 60 cents, at 55 cents. This is due to the eight cent per share loss by the Nokia acquisition.
Elsewhere, Microsoft's Cloud business has grew 147 percent resulting in $4.4bn (£2.6bn) revenue.
“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 Satya Nadella, chief executive officer of Microsoft. “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.”
The company's devices and consumer business increased revenues by 42 percent to $10bn (£5.9bn). Windows grew three percent, Office 365 added more than one million subscribers, Windows Phone added nearly $2bn (£1.2bn), and Bing ad revenue grew 40 percent.
“Our results reflect our customers’ long-term commitments to our products and services, and strong execution by our field teams. We are thrilled with the tremendous momentum of our cloud offerings with Office 365 and Azure both growing over 100% again,” said Kevin Turner, chief operating officer at Microsoft. “Looking forward, we are excited by the amazing opportunities enabled by our technology roadmap and our strong engagement across partners, customers, and developers.”
Increases in revenue for the company’s Computing and Gaming Hardware category have also been witnessed. Xbox revenue grew 14 percent to $104 million (£61m), just as last week Microsoft revealed that sales of the Xbox One doubled since the introduction of Kinect-less packages. The Surface line-up is now generating $409 million (£240m) as a result of the introduction of the Surface Pro 3.
The revenue increases across the board show a positive outlook for Microsoft and one which will improve as Nadella re-organises the company as a leaner, slicker, faster, more modern Microsoft rather than the slow dinosaur for which it has gained a reputation for in recent times.
What do you think about Microsoft's Q4 results? Let us know in the comments.