Microsoft results show effects of turnaround strategy

Microsoft CEO Satya Nadella has put cloud computing at the center of the tech giant’s strategy as growth slows in its traditional software business.

Overall, Microsoft raked in a tidy $6.3 billion in profit and $20.4 billion in revenue during the quarter – but it’s showing no signs of cracking smartphones. While revenue from server based products rose by 10%, Azure revenue grew 140%.

Microsoft saw sales of its Lumia handsets more than halve year on year to just 4.5 million during the final three months of 2015.

This division covers Microsoft’s Office productivity tools, including Office 365 and the Dynamics business software lines, where Office consumer revenue declined by 14 percent, or eight percent in constant currency.

Microsoft’s revenue from personal computing, which includes the Windows business, fell 5% in the quarter to $12.7bn. The Windows 10 offering earlier this month was running on 200 million computers, doubling September’s figures.

With Lumia sales on the decline and Microsoft’s plan to not produce a large amount of handsets, it’s safe to bet that we’re witnessing the demise of Windows Phone.

For the quarter ended December 31, Microsoft reported adjusted earnings per share of 78 cents on revenue of $25.69 billion.

The company also noted that over a third of the companies in the Fortune 500 have tapped Microsoft’s Enterprise Mobility solutions, which is an improvement of nearly three times compared to the previous year’s corresponding quarter.

“We expect our commercial business to remain healthy, with an ongoing shift to annuity as new and existing customers adopt and use our commercial cloud services”, said Microsoft chief financial officer Amy Hood. “Microsoft’s cloud story continues to be solid; while Amazon missed a bit, Microsoft continues to show Wall Street it knows how to set and meet expectations, which the Street values highly”, Merv Adrian, research vice president of Information Management at Gartner, told eWEEK. Windows Phone revenue fell 49 percent.

Surface revenue increased 29 percent driven by the launch of Surface Pro 4 and Surface Book.

There was also good news for the company’s hugely popular games console, Xbox, with membership of its online platform Xbox Live rising by 30% to more than 48 million.

“It was a strong holiday season for Microsoft, highlighted by Surface and Xbox”, said COO Kevin Turner.