Games console lifts Microsoft’s results

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Copy of BER96_NOKIA-RESULTS-_0123_11 Reuters Microsoft posted solid financial results for the last quarter as cloud software sales soared and the Xbox One console was released. The largest software maker is in the middle of implementing a reorganisation and integrating Nokias handset unit as chief executive Steve Ballmer prepares to leave. Photo: Reuters

Seattle - Microsoft’s customers flocked to game consoles and cloud software last quarter, helping Steve Ballmer deliver results that topped projections in his last months as chief executive.

Revenue rose 14 percent to a record $24.5 billion (R272bn) in the fiscal second quarter to December last year, Microsoft said late on Thursday. Analysts had predicted $23.7bn on average, Bloomberg data showed.

Ballmer, who has said he would retire by August, has kicked off Microsoft’s biggest transition in more than a decade. The largest software maker is in the middle of implementing a reorganisation and is working to close the acquisition of Nokia’s handset unit.

Microsoft introduced the new Xbox One game machine in the holiday quarter and boosted sales of web-based software such as Azure and Office 365, even as its traditional programs continue to languish along with personal computer (PC) shipments, which posted a record drop last year.

“They continue to defy the sceptics,” Brent Thill, an analyst at UBS, said.

“This company is outpacing every other large-cap enterprise company by miles. They’re doing the right things. The last part of this is you have to get the right head coach.”

Shares of Microsoft rose 2.1 percent to $36.81 at the close in New York on Friday. The stock added 40 percent last year, compared with a 30 percent increase in the Standard & Poor’s 500 index.

Net income in the second quarter rose 2.8 percent to $6.56bn, or 78c a share, from $6.38bn, or 76c, a year earlier. Analysts had projected on average profit of 69c a share.

Unearned revenue, which comes from sales of multi-year deals that will be recognised in the future, was $19.5bn for the quarter, compared with the $20.5bn average analyst projection, the data showed.

Sales of commercial cloud programs like Azure and Office 365 more than doubled from the year-earlier quarter and the company sold twice as many Surface tablets as it did in the fiscal first quarter, according to chief financial officer Amy Hood.

“We exceeded expectations in both the commercial unit and the devices and consumer segment and we saw improvement in areas where frankly we needed to get better,” Hood said, citing Surface and tablets as examples.

The PC market was stabilising, she said, with corporate shipments rising for the third consecutive quarter and consumer PCs performing better than Microsoft anticipated, although she said demand remained soft as customers chose other devices.

Most investors were more focused on the search for a chief executive than results, said Daniel Ives, an analyst at FBR Capital Markets. The board is narrowing down candidates.

The list included Microsoft cloud computing chief Satya Nadella, Ericsson chief executive Hans Vestberg and former Nokia boss Stephen Elop, as well as other outsiders, people with knowledge of the selection process have said.

Five months have passed since Ballmer said he would retire within a year, and the new chief executive will be stepping in at a crucial point as Microsoft moves away from its software roots. – Bloomberg

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