Microsoft books $8.4 billion write-down on phones in 4Q

The company recorded impairment, integration and restructuring expenses of US$8.4 billion in the fourth quarter ended Jun 30.

Microsoft on Tuesday reported the biggest quarterly loss in its history, acknowledging that its acquisition of Nokia’s handset business had been a major disappointment.

Microsoft has shifted focus away from PCs and toward cloud services since Satya Nadella took helm as CEO past year.

And as for the two “Other” categories – which roll up revenue from Azure, Office 365, Dynamics CRM, and Redmond’s other cloudy offerings – combined they brought in $19.66bn, which was up 35 per cent from 2014.

Just recently the company announced a round of layoffs totaling 7,800 and centered on its Phone Hardware segment. Microsoft’s quarterly revenue declined more than 5 percent year over year to $US22.2 billion.

As stated by analysts, Microsoft Corporation (NASDAQ:MSFT) is expected to report earnings per share for the current fiscal quarter of $0.56. The Nokia phone business was acquired by Microsoft in a $7.2 billion deal in April 2014.

Excluding one-time items of $1.02 per share, adjusted earnings for the quarter were $0.62 .62 per share.

Sales from Windows, the core of the Microsoft business, fell 22% as the company ramped up for the release of the new Windows 10 operating system, aimed at both personal computers and mobile devices.

For Windows Phone fans, the news is not good as the company reported a 68% decline in revenue but the company says this is primarily do to prior revenue recognition and a decline in royalty revenue.

Surface revenue grew 117 percent to $888 million, driven by Surface Pro 3 and launch of the Surface 3. Total Xbox revenue gained 27 percent, while search advertising revenue rose 21 percent.

Still in awe of Apple’s 3 billion in cash? This follows one of the largest rounds of layoffs by any company since Microsoft announced layoffs previous year of over 18% of its entire workforce.

“Phones continue to struggle and it was pretty much in line in the cloud initiatives”, said Dan Morgan, a senior portfolio manager at Synovus Securities Inc., which owns Microsoft shares.

Microsoft is beginning a practice of deferring some revenue from its sales of Windows with the release of Windows 10 this month.

Cloud services are a critical part of Microsoft’s turnaround strategy.

Xbox Live transactions and video games revenue grew about 60% each, and so did console sales.

Microsoft shares fell 3.9 percent in extended trading following the report after closing at $47.28.