Microsoft sales, profit drop
Analysts expected the company to do better after series of changes
Analysts were expecting Microsoft to do better. Although sales of personal computers have been sliding for the past four years, CEO SatyaNadella has beenworking tomakeMicrosoft less dependent on revenue fromits flagship Windows operating system.
SAN FRANCISCO — Microsoft reported a surprise drop in sales and profit for the first three months of the year, a sign the tech giant is still trying to find its way in the post-PC era.
Wall Street was expecting the company to show positive results from a series of changes that CEO Satya Nadella has been making. Instead, revenue for the January-March quarter fell 6 percent to $20.5 billion, while profit plunged 25 percent to $3.76 billion.
On Monday, IBM reported 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. A day later, Intel said it’s cutting 12,000 jobs as fewer people buy PCs that run on Intel processors, opting instead for mobile devices such as smartphones and tablets.
But many analysts were expecting Microsoft to do better. Although sales of personal computers have been sliding for the past four years, Nadella has been working to make Microsoft less dependent on revenue from its flagship Windows operating system, used mostly on PCs.
Microsoft said revenue from Windows software licenses declined 2 percent during the 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 percent.
But revenue from business software and Internet-based services, known as cloud computing, didn’t grow as much as analysts expected. In particular, Microsoft saw only a 3 percent increase in revenue from its “Intelligent Cloud” business, where the company has invested heavily to help business customers run their operations on Microsoft’s servers. The division’s operating profit fell by 14 percent.
In a few bright spots, the company said sales of its Surface tablet computers rose 56 percent to $1.1 billion, while revenue from ads shown with results from its Bing search engine grew 55 percent to $1.5 billion. After spending billions of dollars to develop Bing as a rival for Google’s highly lucrative search business, Microsoft said the service started showing a profit last fall.
Some of that growth can be credited to Windows 10, which comes with a redesigned Web browser, and Cortana, a Siri-like digital assistant. Both are designed to encourage more use of Bing.
Microsoft says Windows 10 is now running on more than 270 million machines, a healthy figure for software that was released only nine months ago. But some of that is the result of free upgrades offered to users of older Windows versions, rather than as software sales to PC manufacturers.
Under Nadella, the company has also released free versions of programs like Word and Excel for smartphones and tablets that run competing operating systems from Apple and Google.
The company hopes to make money by charging users for extra features, and for related services like Skype messaging and online file storage.
Microsoft is also nudging users to change how they buy software. Subscriptions to its Office 365 service are growing rapidly.