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Microsoft's latest financials show Surface boom, Mobile collapse

by Mark Tyson on 29 January 2016, 09:31

Tags: Microsoft (NASDAQ:MSFT), Surface

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Microsoft has just published its FY16 Q2 results, which cover the three months ending 31st December 2015. It sub-headlines the results with a line commenting upon 'cloud strength', and the Microsoft Cloud was indeed a top performer for the company, actually it was the only one of Microsoft's three business segments to enjoy overall growth (ignoring non GAAP constant currency figures).

Headline figures for the FY16 Q2 were; a total of $23.8 billion in revenue, generating $5 billion in net income, producing earnings of $0.62 per share. During the quarter Microsoft said it returned $6.5 billion to investors via share repurchases and dividends. As Reuters reports, the results are better than analyst expectations mainly down to Microsoft's cloud product success. Microsoft's headline figures were heavily impacted by the strong US dollar so it often referenced non-GAAP constant currency figures this time around to put a positive spin on things.

"Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas," said Satya Nadella, chief executive officer at Microsoft. The Intelligent Cloud business grew five per cent thanks to its component successes; server and cloud services, Azure revenue and Enterprise Mobility Services.

Productivity and Business Processes would have produced revenue growth if currency exchange values had been constant. Most of this business segment's success was down to Office 365 subscriber and revenue growth but Dynamics revenue also contributed.

Surface success, Windows Phone distress

Looking at Microsoft's 'More Personal Computing' segment which envelopes all its consumer hardware, a five per cent revenue decline was experienced in FY16 Q2. Surface revenue was up by nearly a third in constant currency, thanks to the launch of the Surface Pro 4 and Surface Book. Conversely Windows Phone revenue dived dramatically, it was cut in half in constant currency, apparently following Microsoft's cunning plans and "reflecting our strategy change announced in July 2015".

Other 'More Personal Computing' segment results included Windows OEM revenue declining five per cent in constant currency - though Microsoft again highlighted more than 200 million Windows 10 activations. Search advertising revenue was up by 21 per cent in constant currency. And finally Xbox Live active users grew to 48 million, that's 30 per cent up year-on-year.

HEXUS Forums :: 3 Comments

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I wouldn't really call it a Surface boom considering it went up 29% YoY and they released a new device costing between $1500 and $3200. Either they've sold a few Surface books and Surface 4 has stood still or they've sold virtually no Surface books and Surface 4 has enjoyed a decent rise. Whichever way you look at it, the numbers are reasonable but certainly not brilliant.
As a user of Windows Mobile (and i like it) i do think its doomed unless Microsoft put some real work into it.
From my perspective they seem to be concentrating on corporate/business rather than consumer. While its all well and good to target a desktop style experience and having the likes of Office working, to get more consumers on board the app store does need some serious work and some decent mobile hardware is needed.
I had high hopes of a one OS for all devices but Microsoft do not seem to be progressing towards that as fast as i hoped or expected, i am even contemplating switching back to Android for my phone.
Surface Pro and Surface book while being desirable are simply very expensive, my next choice for a laptop would currently be a Dell XPS.
From the reviews iv seen, the new surface pro definitely looks like a success!

Never tried windows mobile though, heard the app store is lacking