Microsoft loses $US3b on Nokia writedown

Microsoft reported the largest quarterly loss in its history on Tuesday, after eating another $8.44bn in costs during the fourth quarter of its fiscal 2015, mostly related to its bungled Nokia gobble.

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Microsoft on Tuesday reported the biggest quarterly loss in its history, acknowledging that its acquisition of Nokia’s handset business had been a major disappointment.

Under Chief Executive Satya Nadella, the company has shifted its focus to software and cloud services as demand for its once-popular Windows operating system slows.

In the quarter through June, Windows revenue fell 22 percent, hurt by a decline in PC shipments that researchers at IDC pegged at 11.8 percent globally.

Windows 10 has been a name which has been synonymous with “anticipation” and the 29 July release is going to be – mark my words – M-O-N-U-M-E-N-T-A-L!

Microsoft announced two weeks ago that it was cutting 7800 jobs to streamline its smartphone hardware business. During the same quarter in the previous year, the company posted $0.55 earnings per share. Excluding the write-down, restructuring charges and other items, per-share earnings were 62 cents.

Microsoft’s Devices and Consumer revenue came in at $8.7 billion, declining 13% YoY and down 10% in constant currency. Microsoft’s sales of phone hardware grew, but revenue from Lumia smartphones declined because of increased sales of cheaper devices. Bing, too, increased its market share and search advertising revenue.

“Our approach to investing in areas where we have differentiation and opportunity is paying off”, Nadella said.

In its earnings press release, the company went into further detail about its success with the Xbox. In the fiscal third quarter, Microsoft generated revenue in its commercial cloud division that grew 106% year over year, marking the seventh consecutive quarter of triple-digit growth. First, we have an OEM ecosystem that is creating exciting new hardware designs for Windows 10.

The Surface business is now worth $888 million (£570m), and the Xbox was on the up to, with revenue from the games console up 27%. However, due to the Nokia write-down, Microsoft had to report a $2.1 billion dollar operating loss. This range reflects Windows revenue roughly in line with the PC market, within consumer office we expect the transition to Office 365 subscriptions to continue.

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With shares trading at about $45, the stock, which has a consensus buy rating, offers some 15% gains in the next 12 to 18 months, based on its average analyst 12-month price target of $52.

Money Can Be Made in Microsoft (MSFT) Shares, Despite Declining PC Sales