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Microsoft sales beat expectations
24 Oct 2014 08:08
Microsoft last night reported higher-than-expected quarterly revenue, helped by stronger sales of its phones, Surface tablets and cloud-computing products for companies.
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The results allayed fears of investors in recent days that the industry shift toward lower-margin cloud services was proving hard for established technology leaders to master.
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Microsoft shares, which have climbed 33% over the past year, rose another 3% in after-hours trading on Wall Street last night.
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Investors were keenly watching Microsoft after harsh warnings from IBM and SAP about operating profits as they make tentative inroads into the cloud, which generally yields thinner margins than technology companies are used to.
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Microsoft did not disclose its cloud-based revenue for the fiscal first quarter, but said commercial cloud sales rose 128%, while sales of services based on its Azure cloud platform rose 121%.
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Perhaps more importantly, it said gross profit margin in the unit that includes Azure rose 194%, despite rising infrastructure costs, which includes the huge expense of building and operating data centres.
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"We're the only company with cloud revenue at our scale that is growing at triple digit rates," said the company's CEO Satya Nadella, on a conference call with analysts.
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Nadella was keen to stress that Microsoft is more focused on selling higher-margin services via the cloud to its commercial customers rather than just storage and computing power.
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Microsoft's fiscal first-quarter profit actually fell 13%, largely due to an expected $1.1 billion charge related to mass layoffs announced in July.
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Including that charge, the world's largest software company reported profit of $4.5 billion, or 54 cents per share, compared with $5.2 billion, or 62 cents per share, the same time last year.
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But it easily beat Wall Street's forecast of 49 cents per share, including the charge.
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The charge resulted from Microsoft's plan, launched in July, to cut 18,000 jobs, or about 14% of its workforce, with most of those cuts coming from its newly acquired Nokia phone business.
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The company said its revenue rose 25% to $23.2 billion, helped by the phone business it bought from Nokia in April, handily exceeding analysts' average estimate of $22 billion.
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Sales of its Lumia smartphones hit 9.3 million in the first full quarter since the close of the Nokia deal, while sales of the Surface tablet more than doubled to $908m from $400m last year.
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