Microsoft posts record loss as it writes down Nokia

Windows Phone put a significant drag on Microsoft’s fourth-quarter earnings, released Tuesday.

Still, even with phones dragging things down a little bit, Microsoft CEO Satya Nadella took the quarterly earnings conference call with analysts and the media as a chance to reaffirm that the company has no plans to get out of the game – it’s just going to rethink its approach.

Overall, the company’s devices and consumer revenue declined 13 percent, with Windows OEM revenue dropping 22 percent.

Microsoft is reportedly banking on Windows 10 (which releases July 29), to recover from Q42015 loss.

“We finished the fiscal year with solid progress against our strategic priorities, through strong execution and financial discipline”, CFO Amy Hood said in a statement. Microsoft does not say whether Surface was profitable in the second quarter of the year, but it certainly looks like it based on the $1.3 billion gross margin it generated in the whole FY2015.

Although revenue from Microsoft’s cloud-computing business rose on growth in the Azure and Office 365 programs, the gains were overshadowed by the Nokia-related writedown, the report said.

Microsoft said it added 3 million subscribers for Office 365 in the quarter, taking the total number of subscribers for the product to 15.2 million at the end of June.

The hefty write-down was expected after the company two weeks ago announced 7,800 job cuts globally, primarily in the phone business it acquired previous year.

On the whole, the company announced revenues of $22.2 billion, with an operating loss of $2.05 billion. However, the charges related to the Nokia Devices and Services (NDS) business and restructuring ended up being larger than Microsoft indicated earlier in the month. Excluding charges, Microsoft reported earnings of 62 cents a share.

Revenue in the Commercial Licensing division, which includes copies of Windows and Office sold to corporate customers, fell seven per cent to US$10.5 billion. The blame is placed on the decline of the PC market, following the Windows XP end-of-support. Phone hardware sales were worse than expected.

Its revenue slipped to $22.18 billion from $23.38 billion.

“In cloud alone, our annualized commercial cloud run rate surpassed $8 billion this quarter”.

Microsoft has recently launched seven low cost smartphones over a period of six months, which has raised concerns among fans regarding the company’s commitment and ability to produce devices, which can compete with the iPhone or the Galaxy S6. Azure, Office 365, and the Microsoft Dynamics cloud enterprise software line also all saw at least double-digit revenue increases.