Microsoft posts biggest quarterly loss due to Nokia acquisition

Microsoft was hit by $8.4 billion in charges during its financial quarter ending June 30th 2015, making its biggest net loss of $3.2 billion during the quarter.

The $8.4 billion was formed of a $7.5 billion non-cash impairment charge related to assets associated with its acquisition of the Nokia Devices and Services (NDS) business, a restructuring charge of $780 million, and a charge of $160 million related to the previously announced integration and restructuring plan.

Excluding this impact, operating income would have reached $6.4 billion during the quarter. During the same period last year, its net income stood at $4.6 billion.

However, for the financial year overall, Microsoft posted net income of $12.2 billion – some $10 billion less than its previous financial year – with revenues rising to $93.5 billion during the year.

Microsoft also said it was hit by the strengthening of the US dollar compared to foreign currencies.

“We finished the fiscal year with solid progress against our strategic priorities, through strong execution and financial discipline, which is reflected in our results for the quarter and the year,” said Amy Hood, executive vice president and CFO at Microsoft.

Devices and Consumer revenue declined 13 per cent, with Windows OEM revenue decreasing 22 per cent as revenue was ‘impacted’ by PC market declines following the XP end-of-support refresh cycle.

Surface revenue grew 117 per cent to $888 million, driven by the Surface Pro 3 and the launch of the Surface 3, while total Xbox revenue grew 27 per cent based on strong growth in consoles, Xbox Live transactions and first party games.

Search advertising revenue rose 21 per cent with Bing US market share at 20.3 per cent, up 110 basis points over the prior year.

Office 365 Consumer subscribers increased to 15.2 million, with nearly three million subscribers added in the quarter.

Commercial revenue increased slightly (up four per cent in constant currency) to $13.5 billion.

Commercial cloud revenue grew 88 per cent driven by Office 365, Azure and Dynamics CRM Online and is now on an annualized revenue run rate of over $8 billion.

Server products and services revenue grew four per cent, while Dynamics revenue grew six per cent and the Dynamics CRM Online install base growing by almost two and a half times.

Office Commercial products and services revenue declined four per cent, due to what Microsoft described as the "transition to Office 365 and lower transactional revenue due to declining business PCs following the XP end-of-support refresh cycle".

Finally, Windows volume licensing revenue declined eight per cent.

“In our commercial business we continue to transform the product mix to annuity cloud solutions and now have 75,000 partners transacting in our cloud,” said Kevin Turner, COO at Microsoft.

“We are also expanding the opportunity for more partners to sell Surface, and in the coming months will go from over 150 to more than 4,500 resellers globally.”

Satya Nadella, CEO at Microsoft, commented: "Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits.

"And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem.”