Microsoft head Satya Nadella (pictured) argued that “mobility for us goes beyond just devices”, as the company reported its first set of quarterly results since its acquisition of Nokia’s devices and services unit.
Following last week’s announcement that 12,500 staff related to the former Nokia business are in the firing line, the CEO said: “While we’re certainly focused on building great phones and tablets, we think of mobility more expansively. We think of the opportunity that comes from running our productivity experiences – on Windows, iOS and Android devices”.
But this does not go as far as actually supporting the platforms on its own hardware, with Nokia’s X line, which uses a variant of Android integrated with Microsoft’s services, among last week’s casualties.
Nadella also iterated that in the year ahead, Microsoft is “investing in ways that will ensure our device OS and first party hardware align to our core”. This means streamlining the next version of Windows from three operating systems into “one, single converged operating system for screens of all sizes”.
“We are very focused, I would say, on thinking about mobility share across the entire Windows family”, he said.
For the quarter to 30 June, it reported a net income of $4.61 billion, down 7.1 per cent, on revenue of $23.38 billion, up 17.5 per cent. Operating income was $6.48 billion, up 6.7 per cent.
For the full year, net income was $22.07 billion, up 1 per cent, on revenue of $86.83 billion, up 11.5 per cent. Operating income was $27.76 billion, up 3.7 per cent.
The company reported an operating loss for its phone hardware unit of $692 million, on sales of $1.99 billion. Gross margin in the unit was $54 million, as cost of revenue included $170 million for “amortisation of acquired intangible assets and the impact of decisions to rationalise the portfolio”.
Some 5.8 million Lumia smartphones and 30.3 million non-Lumia devices were sold, with the second of these likely to drop in future following last week’s announcement, which will see non Windows-powered devices be de-emphasised.
The majority of its Lumia sales were for “low price point devices”. Sales of other handsets were “in line with the overall feature phone market dynamics”.
Amy Hood, Microsoft’s CFO, said that while it is still early, sales of its latest Surface Pro device are “outpacing earlier versions”, and that Microsoft is “excited to bring the device to many more markets this summer”.
Hood also said that during the quarter, “we reassessed our product roadmap and decided not to ship a new form factor that was under development”. While it has not been revealed what this is, it had been expected Microsoft would release a smaller screen, pen-oriented tablet in the Surface family.
In a presentation, Microsoft noted Surface revenue was $409 million, driven by second generation devices and Surface 3.
Hood said that Microsoft expects revenue of $1.9 billion to $2.3 billion from the former Nokia business in the first quarter of fiscal 2015, “as we align the device portfolio to our strategy”.
With the expectation of recognising “more than $1 billion in synergies”, the company is looking to reach operating break-even for the Phone business in fiscal year 2016.
Pre-tax costs related to the restructure announced last week are expected to be between $1.1 billion and $1.6 billion, to be recorded in the current fiscal year (and primarily front-loaded).