Microsoft's weak phone sales drag down its Surface and cloud wins

Cloud growth is the brightest spot in the company's quarterly earnings report

Microsoft's acquisition of Nokia is proving to be quite the albatross around the company's neck. The company has stepped away from focusing on phones, and its handset sales revenue fell by almost half in the first quarter.

Microsoft sold only 2.3 million Lumia phones during the quarter, 73 per cent fewer units compared with the first quarter of 2015. That meant Lumia handset revenue fell 46 percent. This dragged down the company's overall device revenue despite major gains in its Surface business.

Sales of Surface tablets and the Surface Book touchscreen laptop brought in $US1.1 billion for Microsoft during the last quarter, compared with $US713 million during the same period last year. That's good news for the company's future, but it's being hurt by the present state of the phone business.

Overall, the company's revenue continued to shrink slightly, with total revenue in the first quarter reaching $20.5 billion compared with $US21.7 billion a year earlier. Microsoft's profit also shrank from almost $5 billion in the first quarter of 2015 to just under $US3.8 billion in the first quarter of this year.

For the most part, Microsoft's story this quarter is similar to what the company has been doing for a while. Its cloud services are driving growth, while traditional parts of the company's business are shrinking alongside the PC market. A key part of the trend is Azure revenue, which grew 110 per cent year over year.

Meanwhile, server software products like Windows Server and SQL Server logged year-over-year declines.

Similar to Azure, Office 365 continued to grow, reaching 22.2 million consumer subscribers, up from 12.4 million a year earlier. The number of Office 365 Commercial seats sold in the quarter grew by 57 per cent, but Microsoft didn't say how many seats it has sold on that side of the business.

What will be interesting to see from Microsoft is whether the company's cloud growth will ever bring it back to its previous financial highs.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags Office 365MicrosoftWindows 10 MobileWindows 10

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Blair Hanley Frank

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?