Microsoft's doing well, but Lumia smartphone sales are tanking

Overall, the company's revenue continued to shrink slightly, with total revenue in the first quarter reaching $20.5 billion compared with $21.7 billion a year earlier. We feel very good about that. Improved profit margins were driven by lower expenses in Microsoft's phone business, which the company scaled back drastically past year, and sales of Surface portable devices. New capabilities included more features for Skype for Business, analytics, and security.The company blamed a higher than expected tax rate for part of the lower net income.

The worldwide business of Microsoft was hurt by a strong USA dollar, as well as declining PC sales. On the consumer side, there are 22.2 million Office 365 subscriptions, up 6%. All told, the More Personal Computing segment saw its revenues climb 1 percent to $9.5 billion.

Analysts were seemingly expecting Microsoft to post numbers much in line with the same period previous year.

This segment grew by 1 percent with cloud services and dynamics products posting the biggest growth rate at 9 percent.

Azure revenue grew 120 percent with usage of Azure compute and Azure SQL database more than doubling.

Cloud computing is seen by many investors as Microsoft's salvation, a growing business that has convinced many there is a bright future for the company beyond the troubled personal computer (PC) market.

"In response to enterprise customer demand, and to increase our share in the cloud market, we grew operating expenses by 13% through Azure-focused investments across engineering, additional sales and marketing capacity and the acquisition of Xamarin", Hood said. And by the looks of things, Microsoft's phone sales are on a free fall. Microsoft said it was able to outperform the PC market because of a "higher consumer premium device mix".

On Monday, IBM reported its 16th consecutive quarter of revenue decline, as commercial customers abandon the once-standard model of buying programs to install on their own computers, and instead use more software online. 35 percent of search revenue in March was driven by Windows 10, indicating that the Bing and Cortana integration in Windows 10 is yielding dividends.

The number of subscribers to Xbox Live, the games console's online service also increased, with active user numbers up 26% on a year ago to 46 million players, the company said.

"We're seeing great traction with businesses who want to bring Microsoft's cloud, mobile device management technology and data analytics together to improve security and productivity resulting in nearly 70% year-over-year growth in our commercial cloud run rate", Kevin Turner, chief operating officer at Microsoft, said in a news release.

Source: Microsoft's doing well, but Lumia smartphone sales are tanking