Microsoft revenue rises, profit falls as Nokia absorbed

Microsoft Corp reported a greater-then-expected 17 percent jump in revenue on Tuesday, beating Wall Street expectations, but its profit fell 7 percent, chiefly due to the costs of incorporating the struggling handset business of Nokia. Shares of the world's largest software company, which hit 14-year highs this week, rose 0.3 percent in after-hours trading.
"These results are good enough for the Street and this is another step in the right direction," said Daniel Ives, an analyst at FBR Capital Markets. "Nokia was a bit worse than the Street was expecting but that is not totally surprising given the massive growth challenges that business faces in the field." Nokia, which Microsoft bought this year in an attempt to take on Apple Inc and Samsung directly in the fast-growing smartphone market, added almost $2 billion to Microsoft's quarterly revenue, but posted an operating loss of $692 million, which included some one time costs.
Nokia's Lumia smartphones, while well-reviewed, have not been as successful as Microsoft hoped, capturing no more than 4 percent of the global market. Lumia sales hit 5.8 million for the nine weeks of the quarter that Nokia was part of Microsoft. That compares with 35.2 million iPhone sales in the quarter. Microsoft is in the process of drastically reducing Nokia's operation, closing some facilities and cutting about half of its 25,000 workforce, as it looks to rein in costs and refocus on cloud-computing under a plan launched by new Microsoft Chief Executive Satya Nadella last week.
Microsoft reported fiscal fourth-quarter profit of $4.61 billion, or 55 cents per share, compared with $4.96 billion, or 59 cents per share, in the year-ago quarter. Wall Street had expected 60 cents per share, on average, although it is not clear how analysts had factored in the performance and cost of integrating the Nokia operation, which became part of Microsoft in late April. Overall quarterly revenue rose 17 percent to $23.38 billion, above analysts' average estimate of $23 billion, mainly because of additional sales from Nokia.