Mi­crosoft turn­around con­tin­ues as profit rise

The Pak Banker - - COMPANIES/BOSS -

Mi­crosoft Corp. posted bet­terthan-pro­jected sales and profit, fu­eled by cloud ser­vices and Of­fice pro­duc­tiv­ity pro­grams, as chief ex­ec­u­tive of­fi­cer Satya Nadella's ef­forts to trans­form the soft­ware maker gain ground.

Profit ex­clud­ing cer­tain items in the fis­cal se­cond quar­ter, which ended 31 De­cem­ber, was 78 cents a share, and sales ad­justed for de­fer­rals were $25.7 bil­lion, Mi­crosoft said in a state­ment Thurs­day. An­a­lysts on av­er­age es­ti­mated profit would be 71 cents on rev­enue of $25.3 bil­lion, ac­cord­ing to data com­piled by Bloomberg.

Nadella is try­ing to re­make the com­pany around cloud ser­vices, such as the Azure com­put­ing plat­form and the sub­scrip­tion-based Of­fice 365, which are see­ing strong growth. The com­pany is also fo­cus­ing on Win­dows 10 to re­store mo­men­tum to the op­er­at­ing sys­tem busi­ness and slash­ing costs, seek­ing to make up for rev­enue lost when it scaled back its un­prof­itable smart­phone ef­forts.

"They have two things go­ing for them-one, the be­lief that Nadella is driv­ing in­no­va­tion to­wards the cloud, and No. 2, Amy Hood has had a blow­torch out on ex­penses," said Brent Thill, an an­a­lyst at UBS AG, re­fer­ring to Mi­crosoft's chief fi­nan­cial of­fi­cer. "It's a to­tally dif­fer­ent vibe com­ing out of that place that it was three years ago."

Mi­crosoft shares rose more than 5% in ex­tended trad­ing fol­low­ing the re­port, af­ter clos­ing at $52.06. The stock climbed 25% dur­ing the three months that ended in De­cem­ber on op­ti­mism about Nadella's turn­around, com­pared with a 6.5 per­cent gain in Stan­dard & Poor's 500 In­dex.

Net in­come in the re­cent pe­riod de­clined to $5 bil­lion, or 62 cents a share. The Red­mond, Wash­ing­ton­based com­pany in July an­nounced it would cut as many as 7,800 jobs and take a mas­sive write­down on its Nokia hand­set unit, plus take a re­struc­tur­ing charge as it scaled back its am­bi­tions for mak­ing its own mo­bile phones.

Un­earned rev­enue, a mea­sure of fu­ture sales, was $25.03 bil­lion. Three an­a­lysts polled by Bloomberg had ex­pected $23.5 bil­lion, on av­er­age.

Mi­crosoft has pledged to reach an­nu­al­ized rev­enue of $20 bil­lion in its cor­po­rate cloud busi­ness by the fis­cal year that ends in June 2018. As of the Septem­ber quar­ter, that met­ric stood at $8.2 bil­lion. The com­pany has been adding cus­tomers and work­loads for its Azure ser­vices, which let clients run and store ap­pli­ca­tions in Mi­crosoft's cloud-data cen­ters.

While the tra­di­tional Of­fice busi­ness -- the soft­ware suite that in­cludes Word, Ex­cel and Pow­er­Point-has been lack­lus­ter in re­cent quar­ters, the Of­fice 365 cloud ver­sions of those pro­grams are grow­ing in both con­sumer and cor­po­rate us­age.

The com­pany's lat­est op­er­at­ing sys­tem soft­ware, Win­dows 10, re­leased at the end of July, is now on run­ning on more than 200 mil­lion devices and out­pac­ing the pre­vi­ous ver­sion's adop­tion by al­most 400%, the com­pany said ear­lier this month. To pro­mote up­take, the com­pany of­fered it as a free upgrade for many con­sumers.

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