Microsoft grows underlying earnings on expansion in cloud

Nieuws Algemeen Wereld 21 OCT 2016
Microsoft grows underlying earnings on expansion in cloud
Microsoft reported better-than-expected results for its fiscal first quarter to September, driven by continued strength in its cloud services business. Revenue was little changed year-on-year at USD 20.5 billion, but excluding Windows deferral revenues and currency effects, rose 5 percent. Operating profit fell 10 percent to USD 5.2 billion, and net profit dropped 4 percent to USD 4.7 billion, also impacted by currency effects. Excluding one-time effects, earnings rose 9 percent, or 13 percent at constant exchange rates, to USD 0.76 per share. 

Revenue growth was strongest at the Intelligent Cloud division, with an 8 percent increase to USD 2.39 billion. This was led by an increase of 116 percent in Azure revenues, 2 percent more revenue from server products and 1 percent increase in enterprise service revenue. Operating profit at the division still fell 13 percent to USD 2.39 billion due to investments in boosting engineering, developer and sales capacity and acquisitions. 

At Productivity and Business Processes, revenue rose 6 percent to USD 6.31 billion, while operating profit dipped 1 percent to USD 3.16 billion. Microsoft continued to increase business users of the online versions of Office and Dynamics CRM, while sales of one-off software declined due to the shift to the cloud. Commercial Office 365 users rose to over 85 million in the quarter, up 40 percent year-on-year, and over 24 million consumers also used the services. 

At the largest division, More Personal Computing, revenue fell 2 percent to USD 9.46 billion, as lower sales of phones and Xbox consoles offset growth in search and Surface products. Phone revenue fell 72 percent, and gaming revenue was down 5 percent, while Surface revenue grew 38 percent and search excluding TAC rose by 9 percent. Windows OEM revenue was up 1 percent in the business market but fell 1 percent in the consumer segment. Restructuring at phones and less marketing expense for the Windows 10 launch helped reduce costs and increase operating profit at the division by 26 percent to USD 1.53 billion. 

Microsoft said it expects to complete the acquisition of LinkedIn in the fiscal second quarter. It will become part of the Productivity and Business Processes division.

Excluding LinkedIn, Microsoft forecast revenue of USD 6.9-7.1 billion for Productivity and Business Processes in Q2, USD 6.55-6.75 billion from Intelligent Cloud and USD 11.2-11.6 billion from More Personal Computing. Negative currency effects are expected to take 1 percent point of Q2 revenue, while the forex effect should end in the second half of the year. 

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