Microsoft reported earnings down 10 percent year-on-year to USD 0.61 per share in its fiscal third quarter to March, hurt by costs for restructuring and integrating the former Nokia mobile phone business. Microsoft said the USD 190 million in restructuring costs in the quarter took 1 cent off earnings, while the 4 percent rise in its operating costs was also driven by the acquisition of the Nokia operations. This pushed its operating profit 5 percent lower to USD 6.59 billion. The gross margin was still up 1 percent to USD 14.57 billion, and revenues rose 6 percent year-on-year to USD 21.73 billion.
Revenue growth was strongest at the Devices and Consumer division, rising 8 percent to USD 9.0 billion, or 11 percent at constant currency rates. The mobile phone business contributed revenue of USD 1.4 billion, and Lumia smartphone shipments rose 18 percent year-on-year to 8.6 million. The company also shipped 24.7 million feature phones in the quarter.
In addition, Microsoft reported double-digit growth in search advertising and a 44 percent rise in revenues from the Surface tablet, while Office 365 Consumer subscribers increased to over 12.4 million, up 35 percent sequentially. Windows OEM revenue was lower, due to the slowdown in upgrades from XP as well as destocking ahead of the launch of Windows 10 later this year.
At the Commercial division, revenues rose 5 percent to USD 12.8 billion and were up 7 percent excluding forex effects. Commercial cloud revenue more than doubled, driven by Office 365, Azure and Dynamics CRM Online. The business is now on an annualized revenue run rate of USD 6.3 billion, Microsoft said. Server products and services revenue grew 12 percent, while Office revenue was down 2 percent, hurt by the slowdown in business PC sales. The latter also led to a 2 percent drop in Windows licensing revenue.
