Lumia letdown: Microsoft phone sales halved in just one year

(For those scoring at home, Microsoft’s sales figures include $1.9 billion revenue that it has deferred for accounting purposes, related to sales of Windows 10 and Halo 5).

Microsoft said that it made a profit of US$5 billion on US$23.8 billion in revenue in the final three months of past year.

Microsoft, under Chief Executive Satya Nadella, has been focusing on cloud services and mobile applications as growth slows in its traditional software business. The company chose to lay off thousands of people from its phone division previous year and refocus on building a relatively small number of Windows Phone handsets rather than keep making the broad range of phones that Nokia had prior to its acquisition in 2014. Overall phone revenue fared little better, with a 49% year on year decline.

Despite the arrival of Windows 10, the company’s Windows OEM revenue dropped 5 percent during the quarter, but Microsoft says that it actually “outperformed the PC market, driven by higher consumer premium and mid-range device mix”.

The numbers beat expectations.

While revenue continues to decline, primarily as a result of the phone segment, Microsoft received positive contributions from Surface, Xbox, and Windows 10 in the holiday quarter.

Revenue in the business that includes Windows fell 5 per cent to $12.66 billion.

Microsoft’s results come as the cloud services market is expected to hit $27.4 billion (£19bn) in 2016, according to Synergy Research Group. The stock is up about 3% after hours.

The company also showed further growth in cloud services, a term that refers to selling access to software or raw processing power running in Microsoft’s own data centers.

Tablet computers were a bright spot for Microsoft, with revenue up 29% following the launch of the Surface Pro 4 and Surface Book. The Redmond, Wash., software giant, meanwhile, is inching closer to its goal of attaining a $20 billion annual run rate for its commercial cloud business in the company’s 2018 fiscal year. “Our commercial business executed well, as our sales teams and partners helped customers realize the value of Microsoft’s cloud technologies across Azure, Office 365 and CRM Online”.

Revenue from Intelligent Cloud grew 5pc to $6.3bn with Server revenues jumping 10pc and Azure revenues up 140pc.

Xbox Live monthly active users grew 30 percent to 48 million. Conversely Windows Phone revenue dived dramatically, it was cut in half in constant currency, apparently following Microsoft’s cunning plans and “reflecting our strategy change announced in July 2015“.