Microsoft Shares Plunge as Results Show Growth is Elusive in Post-PC Market

Michael Euler/ AP

The cloud may be the future, but the specter of the PC lingers. Microsoft is the latest tech giant whose earnings say that loud and clear.

Microsoft on Thursday posted substantial drops in revenue and earnings as it continues to navigate from its legacy PC business into emerging technologies — a day after chipmaker Intel announced a 11% workforce reduction. (Microsoft owns and publishes MSN.)

The Redmond, Wash.-based company reported a 6% decline in fiscal third-quarter revenue to $20.5 billion. Earnings of $3.8 billion, or 47 cents per share, fell 25%in the same quarter a year ago. Microsoft reported adjusted earnings of 62 cents per share, shy of analyst estimates.

Microsoft (MSFT) shares plunged more than 7% on the news in early trading Friday.

A consensus of analyst reports from S&P Global Market Intelligence anticipated revenue of $22.1 billion and earnings per share of 64 cents. Microsoft’s Q3 revenue guidance was $21.1 billion to $22.3 billion.

The quarterly miss comes as the software giant continues to pursue its years-long gambit to transform itself from a license-fee-focused enterprise closely tied to personal computers to a major play in cloud services, virtual reality, gaming and emerging technologies.

But Microsoft’s future remains unclear after nearly a decade of struggles underscored by declining PC unit shipments. The slowly eroding PC market and tightening IT budgets have punctured revenue for Microsoft and others globally. Sagging PC sales were a major reason why Intel is slashing 12,000 jobs and IBM registered its 16th straight quarter of declining sales.

Microsoft said revenue from Windows software licenses dipped 2% during the March quarter, outperforming the overall PC market.

The computing giant has bet heavily on new technologies, and initial results are promising but uneven. Its cloud business, which includes Azure and server software, rose 3% to $6.1 billion in revenue in the quarter, a shallower growth rate than some expected.

Office 365, its subscription-based suite of productivity services, passed 70 million monthly users. And HoloLens, the company’s space-age holographic computer goggles, has wowed analysts and spurred interest among consumers and corporations such as Volvo and NASA over its possibilities.

Windows 10 is also Microsoft’s fastest-spreading Windows operating system, with more than 270 million installations on computing devices.

Monthly active users of Xbox Live surged 26% from last year, to 46 million.

Since he took over as Microsoft CEO two years ago, Satya Nadella has also cut ties with bum investments in Nokia and struck partnerships with the likes of Salesforce and Apple. The moves have resonated with investors, who have bumped up Microsoft’s stock 30% over the past year.

On Thursday, before the Q3 results were announced, Microsoft shares edged up 0.5% to $55.87.

Written by Jon Swartz of USA Today

(Source: USA Today)

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