Microsoft Faces Losses Ahead of Windows 10 Launch, Surface Remains a Star with 117% Increase in Revenues

Rafia Shaikh
Posted Jul 22, 2015
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Still in awe of Apple’s $203 billion in cash? Well, let’s try to talk about some not-so-rich mega tech companies. Microsoft, like Apple, announced its earnings today for the fourth quarter and has posted a 2.1 billion dollar loss ahead of the Windows 10 launch.

Microsoft earnings call Q4 2015:

Microsoft has come under a lot of limelight as it laid off thousands of its employees and continued reorganizing its Windows Phone division. Lumia sales are going up as Redmond has reported an increase of 10% over previous year’s full quarter sales. However, the overall revenue is down due to no flagships in the cap of Microsoft giving the company comparatively small margins to earn profits from low and mid-level Lumia phones.

The company has posted a $2.1 billion in loss with $22.2 billion in revenue keeping the shares at $(0.40). This loss is due to Microsoft a $7.5 billion write-down of the acquisition of Nokia’s Devices and Services division in 2014 and two restructuring charges of $780 million and $160 million. Company shares that “these items totaled $8.4 billion or a $1.02 per share negative impact. Excluding this impact, operating income and EPS would have been $6.4 billion and $0.62, respectively.”

The darling products?

Possibly the brightest spot in the FY15 Q4 Microsoft earnings release is Surface revenue as they hit at $888 million for the quarter, 117% up! 2015 saw Surface revenue exceeding $3.6 billion which is an increase of 65% from the previous fiscal year. Both the Surface 3 and the Surface Pro 3 have become popular gadgets in the consumer markets. Following this success with Surface Pro 4 expected in October, Microsoft seems to be in for continued growth as far as the Surface is concerned.

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Apart from Surface, Xbox keeps experiencing revenue growth which Microsoft claims is “based on strong growth in consoles, Xbox Live transactions and first party games.” Xbox division’s revenue was up 27% compared to the Q4 of 2014 as Microsoft sold 1.1 million more consoles compared to the previous year. Xbox Live transactions revenue went up to $205 million (up by 58%), Platform revenue up $86 million (an increase of 10%), and the revenues from first-party games went up by $63 million (an increase of 62% majorly because of Minecraft sales across different platforms).

More highlights from the report:

Phone Hardware revenue decreased $748 million or 38%. Gross margin decreased $158 million, due to lower revenue, offset in part by a $590 million or 31% decrease in cost of revenue. Phone Hardware has been included in our consolidated financial results starting on April 25, 2014, the date we acquired NDS.

Lumia phones revenue declined, driven by a mix shift to lower price point devices. We sold 8.4 million Lumia phones in the fourth quarter compared to 5.8 million in the prior year.

Non-Lumia phones revenue declined, driven primarily by lower volumes. We sold 19.4 million non-Lumia feature phones in the fourth quarter compared to 30.3 million in the prior year.

Phone Hardware revenue included an unfavorable foreign currency impact of approximately 4%.

Office 365 showed growth with 3 million new subscribers that were in the last quarter.

Analysts claim that both the write-down of Nokia assets and upcoming release of Windows 10 has affected Microsoft earnings of this quarter. Excluding the Nokia restructuring losses, revenue is still down when compared to last year’s $23.28 billion. As Windows 10 is expected to arrive on July 29, Microsoft expects to see more profits from its business and enterprise consumers along with improved PC sales from its OEM-partners.

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