Future of Microsoft's Phone Business in Question After Lumia Sales Plummet

Shares of Microsoft dropped as much as 5 percent in after-hours trading as the software giant announced weaker-than-expected earnings figures for the first quarter of 2016, with Microsoft blaming higher-than-expected taxes. It made a net profit of $3.8 billion on $20.5 billion revenue, which actually represents a drop year-on-year.

Microsoft's cloud platform Azure is one of the mainstays in CEO Satya Nadella's growth strategy, where the cloud platform is fighting fiercely with rivals Google and Amazon Web Services (AWS). Office commercial and cloud services like Office 365 spiked 7 per cent this quarter, while consumer versions of Office went up 6 per cent. Surface Pro 4 and the Surface Book helped drive a 61 percent increase in Microsoft's Surface revenue.

Microsoft said that its Intelligent Cloud segment, which includes its lineup of Azure public cloud services, posted a revenue increase of 3% to $6.1 billion.

But Microsoft's cloud business did not grow quite fast enough during its last quarter to keep investors happy.

Going ahead, Microsoft is looking for revenue in the band of $6.5 to $6.7 billion in its Productivity and business process division.

Azure revenue is up 120 percent in constant currency, and Microsoft says that Azure computer and SQL database usage more than doubled year-over-year.

The slow global PC market has also hit Microsoft. Microsoft Office emerged to be a standout performer in the segment after revenue from the consumer product increased 3%. These predictions seem to have come true for this quarter and they're likely to hold in the year ahead.Microsoft's quarterly profit has missed analysts' estimates as a continued slump in personal computer sales hurt the company's core Windows business.

Microsoft lowered revenue guidance for Q4 to $21.4 billion from $22.4 billion, pushing it below the analyst forecast of $23.1 billion.

Pay attention to which of Microsoft's businesses are making more money and which are making less. However, the company missed those marks by significant margins, posting instead only 47 cents per share in earnings and revenue of $20.5 billion. Middling sales and lack of a market push for the Lumia 650, Lumia 950, and Lumia 950 XL are not suprpringly resulting in a lower market share for Windows Phone.

Microsoft states that Windows 10 is now active on over 270 million devices. Meanwhile, rumors that it is developing a Surface phone to launch later this year continue to circulate, although hardware doesn't appear to be the company's biggest problem in mobile.

Source: Future of Microsoft's Phone Business in Question After Lumia Sales Plummet