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Microsoft reports cloud success, amid shrinking PC revenue

Fri 29 Jan 2016

Microsoft cloud

After reporting its fourth quarter earnings yesterday, U.S. tech giant Microsoft has tipped its cloud and mobile software units as the drivers behind its new strength.

Microsoft’s share price rose 6% in after-hours trading despite financials showing a 15% year-on year drop in profit, and a 10.1% fall in revenue over the last three months of 2015 – principally down to the strength of the dollar and a dwindling PC market.

However, investors were still reassured by the company’s cloud performance, which could suggest CEO Satya Nadella’s transformation plans are starting to pay off for the firm. Since his appointment at the head of Microsoft in 2014, Microsoft has adopted a new focus on cloud services, such as Microsoft Azure, Dynamics CRM and Office 365.

Nadella commented that “businesses everywhere are using the Microsoft Cloud as their digital platform.” He suggested that this interest was stirred by “ambitious transformation agendas.”

Now the second largest cloud provider, Microsoft stands far ahead of rivals Salesforce, Oracle and Google, according to analysts at Goldman Sachs. The company still trails market leader Amazon Web Service, but beats AWS in terms of growth. Its Azure business has more than doubled in revenue each year – a much faster growth than AWS’ 65%.

Many prefer Microsoft’s cloud infrastructure as it offers more flexibility to companies moving software about. However, AWS’ package offers a wider range of tools, and the company also has more experience in the market.

To add to its cloud success, Microsoft also recorded a positive jump for its mobile devices business. Surface revenue grew 29% in constant currency terms, led by the recent launch of the Surface Pro 4 and Surface Book. The company’s gaming and digital content unit similarly reported positive growth, with monthly active users on its Xbox Live platform rising 30% year-on-year, to 48 million.

“It was a strong holiday season for Microsoft, highlighted by Surface and Xbox,” said COO Kevin Turner. “Our commercial business executed well as our sales teams and partners helped customers realise the value of Microsoft’s cloud technologies across Azure, Office 365 and CRM Online.”


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