Microsoft Q4 FY2015 by the numbers: $22.2 billion revenue, $2.1 billion loss
Microsoft has revealed its financial results for Q4 FY 2015, posting its biggest-ever loss thanks to a $7.5 billion write-off related to the acquisition of Nokia's Devices & Services business. In the second quarter of the year, Microsoft's revenue was $22.2 billion, while gross margin, operating loss and loss per share came in at $14.7 billion, $2.1 billion and $0.40 per share.
Microsoft has also revealed a $780 million "restructuring charge" as well as a $160 million write-off that is related to its previous restructuring plan. However, both are basically chump change in comparison to the damage that buying Devices & Services has caused. Deciding to make its own Windows smartphones looks to be a huge mistake for Microsoft. There is, however, some good news too.
In the second quarter of the year, Microsoft sold 8.4 million Lumia smartphones, which represents a 10 percent growth year-over-year. Of those, 5.8 million were sold after the acquisition, while the remaining 1.7 million were sold beforehand.
Even though sales are up, revenue from the Lumia line is down year-over-year, to $1.23 billion from $1.98 billion, as well as quarter-over-quarter, from $1.4 billion. Microsoft blames "a shift to lower price point devices" for the decline. For those who are really curious, Microsoft also sold 19.4 million non-Lumia-branded handsets.
It is worth noting that Microsoft sells mostly low-end Lumias, with few consumers opting for its mid-range and high-end smartphones. The launch of Windows 10 Mobile, coupled with some top-notch Lumias, may change consumers' perception of its premium offerings.
On the Surface side of things, Microsoft says that its Windows 8.x tablets have generated $888 million in revenue in the second quarter of the year, which represents a 117 percent increase year-over-year. Surface Pro 3 is the main revenue driver, but Surface 3 also plays its part. Microsoft does not say whether Surface was profitable in the second quarter of the year, but it certainly looks like it based on the $1.3 billion gross margin it generated in the whole FY2015.
The whole Computing and Gaming Hardware division was profitable, however. Revenue came in at $1.93 billion, while gross margins were $0.44 billion. Both numbers are higher year-over-year, rising from $1.34 billion and $0.02 billion, respectively. Xbox also performed well, selling 1.4 million units, which Microsoft says is a 30 percent increase year-over-year. Revenue is also up, by 10 percent.
As expected, Microsoft reveals that Windows OEM revenue is down, dropping by 22 percent year-over-year. The blame is placed on the decline of the PC market, following the Windows XP end-of-support. Windows 10 might improve things slightly, but its effect will only be felt later this quarter, following its July 29 launch, and, more so, in the final quarter of the year.
Office 365 attracted nearly 3 million new subscribers in the second quarter of the year, with total subscribers reaching 15.2 million. More will surely follow, proving that Office is still a sought-after suite even with the PC market the way it is. Of course, Office 365's growth is also fueled by its availability on Android and iOS, which likely plays a key part in its success.
Bing is also growing, generating 21 percent more advertising revenue year-over-year, while its US market share is up 110 points year-over-year to 20.3 percent. Bing is well positioned to grow further as it is integrated in Windows 10, which Microsoft hopes to be running on one billion devices in the first two to three years of availability.
Overall, Devices and Consumer revenue is down by 13 percent year-over-year, falling to $8.7 billion. The same cannot be said about Commercial revenue, which grew slightly to $13.5 billion. Here is the breakdown.
Commercial cloud revenue is up 88 percent year-over-year, thanks to Office 365, Azure and Dynamics CRM Online. This is a $8 billion business for Microsoft, nearly as important as Devices and Consumer, which emphasizes the software giant's strength in the enterprise market. If it is not clear enough, the company has more to gain from enterprise sales than consumer sales.
Revenue from server products and associated services is up by four percent, Dynamics revenue is also up by six percent, with the latter's Dynamics CRM Online install base growing 2.5 times year-over-year. Where this category comes short is in Office Commercial products and associated services, which declined by four percent year-over-year thanks to Office 365 and the Windows XP after-end-of-support effect, and Windows volume licensing, which is down by eight percent year-over-year, again mostly thanks to Windows XP.
"Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits", says Microsoft CEO Satya Nadella. "And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem".
Photo credit: drserg / Shutterstock