Microsoft (MSFT) Stock Off on Lower Quarterly Profit

Shares of Microsoft Corporation (MSFT) were trading down -3.47 or -7.38 percent to $43.54 in Tuesday's premarket after the company reported late yesterday a lower profit for its second quarter despite a rise in revenue. In addition to the earnings news, several analysts downgraded the company's stock. Microsoft stock closed at $47.01, down -0.17 or -0.36 percent in Monday's regular trading session.

Redmond, Washington based Microsoft Corp was founded by Bill Gates and Paul Allen in 1975 and is the largest maker of computer software in the world by revenue.
The company also manufactures and sells consumer electronics and personal computers, operating systems and game consoles such as the Xbox. Microsoft is best known for its operating system, Microsoft Windows, its Internet Explorer web browser and the Microsoft Office Suite.

Microsoft reported revenue of $26.5 billion for the company's fiscal second quarter which ended on December 31st, 2014. Gross margin for the quarter was $16.3 billion, while operating income came to $7.8 billion and diluted earnings per share was $0.71.

The company took a $243 million reorganization charge or -$0.02 per share for integration and restructuring due to its takeover of Nokia Devices and Services in September of 2013. In addition, the charge included Microsoft's restructuring plan it announced in July of 2014.

Microsoft Chief Executive Officer, Satya Nadella said in a statement that, "Microsoft is continuing to transform, executing against our strategic priorities and extending our cloud leadership, we are taking bold steps forward across our business, and specifically with Windows 10, to deliver new experiences, new categories, and new opportunities to our customers.

While the company reported a -13 percent decline in the licensing of its Windows OEM Pro software, device and consumer revenue grew at an +8 percent pace to $12.9 billion. Surface revenue increased +24 percent to $1.1 billion from its Surface Pro 3 and accessories, while Office 365 Home and Personal subscriptions grew to over 9.2 million, a gain of +30 percent over the same period one year ago.

Sales of its Xbox console totaled 6.6 million units with significant holiday sales and revenue from the company's phone hardware division came to +2.3 billion as the company sold 10.5 million units of its Lumia phone. Amy Hood, Executive Vice President and Chief Financial Officer said that, "We remain disciplined in our approach to operational and execution excellence, balanced with investments that drive meaningful growth for the business while increasing capital return to shareholders .

Commercial revenue increased by +5 percent to $13.3 billion as commercial cloud revenue grew by +114 percent, in large part due to Office 365, Dynamic CRM Online and Azure. Cloud revenue is now up to an annualized $5.5 billion.

Despite the encouraging numbers on the devices and cloud end of the business, its software business - which is still the company's main source of income - has been negatively impacted by a declining PC market and new lower priced licenses sold to academic institutions.

Due to its transition and offering its Windows 10 operating system as a free upgrade, several Wall Street analysts have lowered their forecasts for Microsoft, including JPMorgan (JPM), which cut its price target from $53 to $47, and Citi (C), which dropped its rating to Sell from Neutral. In addition, Nomura Securities cut its rating to Neutral with a price target reduced from $56 to $50 per share.

Other News About Microsoft
Microsoft's HoloLens explained: How it works and why it's different
New computer headset made by the company shows promise.
Satya Nadella's Ballmer moment: We need your love
Microsoft's CEO announces the release of its Windows 10 operating system.

Other Stocks in the News
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Apple holiday sales results will be released this Tuesday.
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Published on Jan 27, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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