Microsoft surprises with lower sales, profit
Analysts expected good news after CEO made changes
SAN FRANCISCO— In a sign that Microsoft is still finding its way in the post-PC era, the tech giant reported a surprise drop in quarterly sales and profit.
Wall Street was expecting the company to show positive results from a series of changes that CEO Satya Nadella has been making in Microsoft’s business. Instead, revenue for the January-March quarter fell 6 per cent to $20.5 billion, while profit plunged 25 per cent to $3.76 billion.
The results came in a week when other industry stalwarts reported their own struggles with major changes in the way people use technology. IBM marked its 16th consecutive quarter of revenue decline, as commercial customers abandon the once-standard model of buying programs to install on their own computers and instead use more software online. Intel, meanwhile, said it is cutting 12,000 jobs because fewer people are buying PCs that run on its processors.
But many analysts were expecting Microsoft to do better. While sales of personal computers have been sliding for the past four years, Nadella has been working to make the company less dependent on revenue from its flagship Windows operating system, used mostly on PCs.
Microsoft said its revenue from Windows software licenses declined 2 per cent in the March quarter, after adjusting for currency fluctuations. That’s better than the overall drop in PC shipments, which analysts at the Gartner research firm estimated at nearly 10 per cent.
But revenue from business software and Internet-based services, known as cloud computing, didn’t grow as much as analysts expected.
Microsoft said it earned 47 cents a share for the fiscal third quarter, or 62 cents after adjusting for one-time charges. Analysts were expecting adjusted earnings of 64 cents a share and revenue of $22.1 billion.
Microsoft shares were down more than 5 per cent in after-hours trading, after closing Thursday at $55.78.