Main points:

• 1.1m Xbox One + 360 shipments compared to 1m 360 shipments in same period last year
• Net Income: $4.61bn (down 7.1% from same period last year) - Lower than what analysts expected
• Nokia contrubuted to the lower profits
• Xbox revenue increased 14% to $104m

Computing and Gaming Hardware

The D&C Hardware segment was renamed Computing and Gaming Hardware in the fourth quarter of fiscal year 2014.  Computing and Gaming Hardware revenue increased $274 million or 23%, driven by higher Surface and Xbox Platform revenue.  Gross margin increased $665 million compared to the prior year, which included the Surface RT inventory adjustment charge.  Current year cost of revenue included Surface inventory adjustments resulting from our transition to newer generation devices and a decision to not ship a new form factor.

·         Surface revenue was $409 million, driven by our second generation Surface 2 and Surface Pro 2 devices, and the recent launch of Surface Pro 3.

·         Xbox Platform revenue increased $104 million or 14%, driven primarily by increased console revenue.  We sold in 1.1 million consoles in the fourth quarter, as we drew down channel inventory, compared to 1.0 million consoles during the prior year.

During the E3 conference in early June, we highlighted several new titles that will be available exclusively on the Xbox Platform.  We also launched a lower-priced console without the Kinect sensor to provide additional choice to our customers, and are planning to offer Xbox One in additional markets beginning this fall.

Microsoft Results:

MICROSOFT CORPORATION

FOURTH QUARTER FINANCIAL HIGHLIGHTS

All growth comparisons relate to the corresponding period in the last fiscal year.  Please refer to the reconciliation of our GAAP and Non-GAAP financial results, and the Noted Items table provided above for additional information.

SUMMARY

Nokia Devices and Services Acquisition

On April 25, 2014, we acquired substantially all of Nokia’s Devices and Services business (the acquired assets and operations are hereafter referred to as “NDS”).  Beginning on that date, we reported the revenue and cost of revenue from NDS, including amortization of intangible assets, in the new Phone Hardware segment.  For the fourth quarter, the results of NDS impacted revenue, gross margin, operating income, and diluted EPS by $1.99 billion, $54 million, $(692) million, and $(0.08), respectively. 

Operating Summary

Revenue was $23.38 billion, up 18% year-over-year.  Non-GAAP revenue grew 22%.  As described in the Noted Items table, prior year revenue was decreased by $38 million and current year revenue was increased by $382 million.  Additionally, NDS contributed $1.99 billion to current year revenue.

Gross margin was $15.79 billion, up 10% year-over-year.  Non-GAAP gross margin grew 17%.  As described in the Noted Items table, prior year gross margin was decreased by $900 million and current year gross margin was increased by $382 million.  Additionally, NDS contributed $54 million to current year gross margin.

Operating income was $6.48 billion, up 7% year-over-year.  Non-GAAP operating income grew 23%.  As described in the Noted Items table, prior year operating income was decreased by $900 million and current year operating income was increased by $255 million.  Additionally, NDS contributed $(692) million to current year operating income.

Diluted EPS was $0.55, down 7% year-over-year.  Non-GAAP diluted EPS grew 6%.  As described in the Noted Items table, prior year diluted EPS was decreased by $0.07 and current year diluted EPS was decreased by $0.03.  Additionally, NDS contributed $(0.08) to current year diluted EPS.

Microsoft Profit Misses Estimates on Weak Demand

Microsoft Corp., which just announced the biggest job cuts in company history, reported profit that fell short of estimates in the fiscal fourth quarter, weighed down by the acquisition of Nokia Oyj’s handset business.

Net income in the period that ended June 30 was $4.61 billion, or 55 cents a share, on sales of $23.4 billion, Redmond, Washington-based Microsoft said in a statement today. Analysts were projecting profit of 60 cents and revenue of $23 billion, according to the average of estimatescompiled by Bloomberg. Excluding results from Nokia, profit would have been 63 cents a share, compared with an average prediction for 64 cents, based on estimates from seven analysts.

Chief Executive Officer Satya Nadella, who took over in February, is struggling to make Microsoft’s smartphones and tablets more appealing for consumers, who are opting for products that are made by Apple Inc. or run Google Inc. software. The results underscore the challenges facing Nadella as he contends with a PC market that’s on track to shrink for a third straight year in 2014.

“In consumer you are still trying to build services and demand for products,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends holding the shares.

Unearned revenue, which comes from sales of multiyear deals that will be recognized in the future, was $25.2 billion for the quarter, compared with the $24.5 billion average analyst projection, according to data compiled by Bloomberg.

 Nadella Strategy

Microsoft shares fell in extended trading following the report. They were little changed at $44.83 at the close in New York. The stock climbed 1.7 percent last quarter, compared with a 4.7 percent increase in the Standard & Poor’s 500 Index.

In addition to a plan to cut 18,000 jobs as the company integrates Nokia’s handset unit, acquired in April, Nadella has discontinued unpromising products and placed more emphasis on cloud-computing software delivered via the Web. The restructuring will result in $1.1 billion to $1.6 billion in charges in the current fiscal year, according to Microsoft. The company didn’t say last week how much it expects to save from the firings.

Microsoft is also seeing signs of improvement in the PC market, which drives sales of Windows and Office software. PC shipments declined 1.7 percent in the second quarter, a smaller drop than estimated as businesses upgraded their equipment. Demand in the U.S., Europe and Canada helped also helped to make up for a drop in Asia, researcher IDC said earlier this month.

“The strength in the enterprise and the comments on the refresh would seem to bode well for Microsoft continuing to have uptake with enterprise sales,” said Michael Shinnick, a fund manager at South Bend, Indiana-based Wasatch Advisors Inc., which has $19 billion under management.

http://www.bloomberg.com/news/2014-07-22/microsoft-revenue-misses-estimates-on-weak-demand-from-consumers.html

I expect billions of profit. Again

We already have a thread for this. Kowenicki made one weeks ago

http://gamrconnect.vgchartz.com/thread.php?id=187131

Kowen is banned so the other thread wouldn't get updated. 

Tagged!

Tagged :)

Ah right, fair enough.

I think you just gave the wrong link?