Microsoft reports US$3.2 billion quarterly loss

July 21 Microsoft Corp reported a $3.2 billion quarterly net loss, hurt by charges related to its Nokia phone business and job cuts, and weak demand for its Windows operating system.

Microsoft lost a ton of money in the second quarter – mainly from an $8.4 billion write-down of its 2014 acquisition of Nokia. The company had posted net income of $4.61 billion, or 55 cents per share, a year earlier. There were glimmers of hope in the midst of the rough quarter. The Surface range appears to be credibly carving out a decent niche for itself. Excluding the Nokia restructuring losses, revenue is still down when compared to last year’s $23.28 billion. In the sequentially preceding quarter, Surface totted up $713 million in sales. And subscriber adds were impressive (from 9 million to 12.4 million in the last quarter).

The real question is where does Microsoft go from here?

Windows 10, basically speaking, delivers “a more human way to do”. Mind you, those two divisions combined accounted for 60 per cent of the year’s business, but the other divisions were mostly able to offset the shrinkage. As a whole, licensing was down 7 percent.

And Microsoft is indeed doing a good job out of it.

The Xbox One may not always beat the PlayStation 4, but the device is starting to gain some momentum from a business perspective for Microsoft. Cloud services were up 88 percent, with an annualized run rate now of over $8 billion (£5.1 billion). The bottom line, however, will look worse – restructuring charges could drag the company to a loss. First, we have an OEM ecosystem that is creating exciting new hardware designs for Windows 10. Given the product mix-the continued lack of high-end phones, for example-10 percent growth year-on-year doesn’t seem bad. “They’re still progressing but people would like them to move faster”.

That write-down, however, was a costly one-off.

This means that while Microsoft isn’t yet on the cloud level of, say Salesforce.com (CRM) or Amazon (AMZN), whose dominant Amazon Web Services platform has become a standard, it does show the enormous growth potential in Microsoft’s commercial cloud segment. The company posted another strong quarter, topping both earnings and revenue expectations. In the year-earlier quarter, customers were buying PCs ahead of the expiration of support for Windows XP, the company said.

The biggest question is if Windows 10 can really boost PC sales, given the fact that it will be offered free of charge to those running genuine Windows 7 or 8.1 on their computers.