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Bad News, Microsoft Style: $7.5 Billion Nokia Charge, $3.2 Billion Net Loss, 5.1 Percent Revenue

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Microsoft has reported the biggest quarterly net loss in years, no thanks to a decrease in demand for the Windows OS, as well as the company writing down Nokia's phone business

On Tuesday, July 21, Microsoft reported $3.2 billion net loss or 40 cents per share for the quarter ended June 30, 2015. By comparison, the company's net income in the same period in 2014 was $4.61 billion or 55 cents per share.

The $7.5 billion was the accounting charge as a result of its acquisition of Nokia's mobile phone business. Even though this charge is merely on paper and will not impact Microsoft's cash fund, it will leave a psychological impact.

The company also took a $940 million accounting charge due to the job cuts it announced in 2014, as well as in July. For the unfamiliar, earlier this month, Microsoft divulged that it would be laying off 7,800 employees i.e. 7 percent of its workforce who primarily comprise its phone hardware business.

The revenue for Microsoft's fiscal fourth quarter was $22.2 billion, which is a 5.1 percent drop. Operating loss, gross margin and loss per share for the period were $2.1 billion, $14.7 billion and $(0.40) per share, respectively.

Revenue from Windows OEM also saw a decline and fell 22 percent largely due to "XP end-of-support refresh cycle." Microsoft is poised to release Windows 10 OS on July 29 and the company would be hoping that this would give a push to its revenue in the next quarter.

Under CEO Satya Nadella's guidance, Microsoft has been focusing more on cloud services and software as demand for the Windows OS sees a steady decline. Nadella, however, is optimistic of the company's future and believes that the release of Windows 10 will open new doors for Microsoft.

"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," said Nadella. "And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem."

Revenue generation from Microsoft's cloud business grew by 88 percent or $832 million.

On Tuesday, in after-hours trading Microsoft's shares drop to $45.38, falling by 4 percent.

Photo: Robert Scolbe | Flickr 

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