Microsoft’s purchase of Nokia's mobile business dragged down fiscal fourth-quarter profit, even as the software maker benefits from improving corporate demand for computers and cloud computing.
Nokia’s operations, which Microsoft bought for 5.44 billion euros ($7.33 billion) in April, contributed to a 7.1 percent decline in net income to $4.61 billion for the period that ended June 30, the company said in a statement yesterday.
Lumia sales hit 5.8 million for the nine weeks of the quarter that Nokia was part of Microsoft. That compares with 35.2 million iPhone sales in the quarte rper share, in the year-ago quarter.
Chief Executive Officer Satya Nadella, who took over in February, is struggling to reduce costs, with 12,500 of the 18,000 job cuts announced last week related to Nokia. While Microsoft’s main software business topped estimates, the company has made little headway in delivering popular smartphones and tablets.
Nadella will cut more costs and prioritize core areas, he said on a conference call yesterday. He also pledged to make the money-losing Bing search engine profitable by fiscal 2016. Nadella said MSN websites, retail stores and hardware production are now considered supporting efforts. He said Microsoft’s new phone unit, formerly the Nokia handset business, is on track to break even on an operating basis in 2016 as well.
At the same time, cloud and enterprise software performed well, with revenue doubling for the Web-based versions of Office and Microsoft’s Azure cloud-based service for hosting applications. Corporate demand for personal computers helped shore up sales of Office and Windows to businesses, with companies signing multiyear licensing deals.
Microsoft is also seeing signs of improvement in the PC market, which drives sales of Windows and Office software.
Microsoft will also work is under way to "unify" parts of its different Windows operating systems.
"We will streamline the next version of Windows from three operating systems into one single converged operating system for screens of all sizes," Nadella said.
The firm also confirmed it had recently scrapped a new type of tablet.
"During the quarter, we reassessed our product roadmap and decided not to ship a new form factor that was under development," said Amy Hood, the company's chief financial officer.
A single team is now working to deepen the links between Windows for PCs, Windows Phone and the Xbox OS, which are all based on the single Windows NT software core.
Nadella said one target was for developers to be able to write a single app that would adapt its layout and controls to suit whether it was being used on a phone, tablet, PC or games console.