Microsoft Corporation (NASDAQ:MSFT) slipped 10 percent on Tuesday after the software firm reported results for the quarter that beat expectations, but with a warning that a strong dollar together with a sluggish PC market will adversely affect growth for the current year. In a statement released on Monday, Microsoft reported that revenue gained from commercial-licensing dropped to $10.7 billion in the period ended December 31, against estimates of $10.9 billion as polled by Bloomberg. On the other hand, unearned revenue was $21.2 billion, down from estimates of $21.8 billion. The shares plunged as much as $42.11, its lowest since July of 2013.
In an interview with Reuters, Microsoft Corporation (NASDAQ:MSFT) chief financial officer Amy Hood said that a surprise came in from commercial licensing, noting that the company “had a little bit of a headwind from foreign exchange as well as macro conditions in China and Japan.” FBR Markets & Co. analyst Daniel Ives remarked that even though Microsoft made a “beat on consumer and devices, it was a slight miss on the commercial side.” According to Hood, she considers currency fluctuations as well as demand issues in Russia, China, and Japan as the main hurdles that have to be dealt with for the rest of the year.
On a more positive news, Microsoft Corporation (NASDAQ:MSFT)’s Surface tablets grew 24 percent at $1 billion of sales for the quarter, compared to the same period for the previous year. Lumia smartphone shipments also recorded a growth of 28 percent, for a total of 10.5 million units. The company’s Windows Phone, however, account for only 3 percent of the mobile phone market while the sales of its Surface tablet represent a meager amount compared to Apple Inc. (NASDAQ:AAPL)’s iPads which made a total quarter sales of $9 billion.
Meanwhile, Microsoft Corporation (NASDAQ:MSFT)’s position in the cloud business is showing positive signs of growth, as corporate sales of cloud programs have more than doubled, recording a revenue rate of $5.5 billion on annualized basis. In a note to clients, RBC Capital Markets analyst Ross MacMillan said that “the cloud transition remains on track, but lower numbers means a lower price target.”
This article has been written by Nonito Guntan.
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