Microsoft 4Q Earnings Hurt By Nokia Acquisition

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Photo credit MARKKU RUOTTINEN/AFP/Getty Images

Photo credit MARKKU RUOTTINEN/AFP/Getty Images

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(AP) — Microsoft Corp. reported fourth-quarter earnings that took a hit from the Nokia devices business that it bought in April, but the company said growth in Internet-based computing services to businesses boosted results.

Net income in the three months through June 30 fell 7 percent to $4.61 billion, or 55 cents per share, from $4.97 billion, or 59 cents per share, a year ago.

Microsoft said the absorption of the Nokia unit cut 8 cents per share from earnings. It lost another net 3 cents on restructuring and tax-related items. Excluding those items, earnings hit 66 cents per share, beating the 60 cents expected by analysts polled by FactSet.

Revenue rose 18 percent to $23.4 billion, although $2 billion came from the Nokia unit. That was slightly better than the $23 billion analysts were looking for.

Shares rose 16 cents to $44.99 in after-hours trading following the release.

Microsoft announced last week that it is cutting up to 18,000 jobs over the next year, mostly related to Nokia. Most of the $1.1 billion to $1.6 billion in restructuring charges for the cut will be recorded in the coming two quarters.

The company is transitioning to provide more of its software and services to mobile devices that are linked to distant back-end servers known as the cloud. That’s a departure from its long-time strengths in the Windows personal computer operating system and software tied to that.

CEO Satya Nadella, who replaced Steve Ballmer in February, said revenue from commercial cloud services such as its Office 365 software suite for enterprises and Azure computing platform more than doubled to an annual rate of $4.4 billion.

“I’m proud that our aggressive move to the cloud is paying off,” Nadella said in a statement.

Still, though, Windows revenue from manufacturing partners rose 3 percent, boosted by companies buying computers in developing markets. It also continued to ride the wave of companies upgrading their computers when Microsoft ended support in April for its 12-year-old Windows XP operating system.

The company is also attempting to do more to craft its own devices, to spur consumer demand and to prod its hardware partners to innovate around the Windows platform.

However, revenue from its Surface tablet — which it touted as a replacement for both a laptop and a tablet — slipped to $409 million from $500 million in the previous quarter. The Surface business continued to lose money despite the launch of the Surface Pro 3 in late June.

It sold 1.1 million Xbox consoles, benefiting from an effective $100 price cut on its latest Xbox One when it allowed consumers to buy it without the Kinect motion detecting sensor.

The Nokia business sold 5.8 million Lumia smartphones, though it said lower-priced items drove much of the volume, along with 30.3 million non-Lumia phones that it is discontinuing.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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