Microsoft's revenue falls, but cloud remains a bright spot

The Azure cloud platform is gaining strength

Microsoft is betting on reinventing itself as a cloud company, and the financial results it released Thursday show that its push is paying off despite an overall decline in revenue.

Azure revenue rose 127 percent from a year earlier, and sales of Azure Premium Services like Machine Learning were three times higher during the last quarter of 2015 than in the same period of 2014. (Not counting the effects of currency exchange rates.) The company also bragged that more than one-third of the Fortune 500 is using its Enterprise Mobility solutions, which make it easier to secure devices that a company controls.

The cloud growth is a bright spot for the company and is important to watch as the market moves toward greater use of cloud resources for software, infrastructure and application development.

Overall, Microsoft's revenue from the quarter ended Dec. 31 was US$23.8 billion, a decline of 10 percent from the same period in 2014.

The U.S. dollar's rise against other currencies hit Microsoft hard, just as it drove down revenues for other tech titans like Apple and IBM. Revenue for Microsoft's Productivity and Business Processes segment was down 2 percent year over year despite what the company called "continued strong performance" of Office 365 and Dynamics CRM Online.

Microsoft continued to feel the impact of its changed phone strategy, with revenue from phone sales declining 53 percent year over year. The company decided to lay off thousands of people from its phone division last year and refocus on building a relatively small number of Windows Phone handsets rather than keep making the broad range of phones that Nokia had prior to its acquisition in 2014.

That meant Microsoft sold fewer phones. It sold 4.5 million Lumia phones during the holiday quarter, compared with 10.5 million Lumia handsets during the same period in 2014.

The drop in phone revenue dragged down Microsoft's overall devices revenue by 26 percent compared with the previous year, despite Surface revenue of $1.35 billion, driven up 22 percent year over year by the launch of the Surface Book and Surface Pro 4.

Overall, the quarter seemed to be fairly indicative of Microsoft's future: Look to the cloud to see where the company is going.

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Blair Hanley Frank

IDG News Service
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