Microsoft’s device business marred by smartphone sales freefall

Total revenue for the More Personal Computing (MPC) division – a 2015 creation in another Microsoft reshuffling of both the company’s org chart and how it reported earnings – in the December quarter was $12.7 billion.

Windows Phone continued its spectacular fall – a 49% revenue decrease – but it’s such old news that during the call, no analysts asked about it.

Productivity and Business Processes, which includes Office and Dynamics, made $6.7 billion for the quarter compared to $6.3 billion in the previous quarter.

Intelligent Cloud (IC), which includes service revenue and Enterprise Services: $6.4 billion compared to $5.9 billion in the last quarter.

“It shows that momentum is building for Microsoft in 2016 rather than slowing, and that’s different from what we’re hearing from other enterprise tech companies”, said FBR Capital Markets analyst Daniel Ives.

“Users on the Windows Phone platform keeps declining and have moved to other platforms, but [we] didn’t notice that Microsoft is showing any effort to retain them”, the company said.

To add to its cloud success, Microsoft also recorded a positive jump for its mobile devices business. The results seem to have a mixture of good, bad, and ugly for Microsoft and for now the cloud business is the star performer.

Most of Microsoft’s smartphones target the sub $200 segment and are mostly sold in emerging markets that are expected to witness more growth in smartphone adoption.

Satya Nadellas turnaround of Microsoft Corp. persisted in the fiscal second quarter, as more businesses bought cloud services and Internet-based tools like Azure and Office 365 from a company once mainly known for personal-computer software. Our cloud architecture reflects real world distributed cloud computing needs and services that enable businesses to convert data into intelligence and drive business transformation. The MWC 2016 won’t see any new Microsoft Lumia phones and the rumors about an exotic “Surface Phone” in the making might be just rumors.

Rumours suggest that the company is planning to retire its Lumia range in favour of a Surface-branded smartphone, which could launch later this year. The latest flagship devices of Microsoft, Lumia 950 and Lumia 950 XL failed to make any impact with an unfinished Windows 10 OS. Office 365 revenue growth alone hit almost 70 per cent, with Office consumer subscribers increasing to 20.6 million.

“Most midsize and large organizations are not about to decommission their datacenters and so have a need to serve their internal customers with self-service and a granular set of resources and workload controls”, IDC analyst Al Hilwa said in research note. “For the next year, we understand the market is not likely to grow, but we can still grow”.

“This was the best quarter for Surface ever with over $1.3 billion in sales”, said Nadella.