Microsoft revenue, profit miss estimates

Fri Apr 22, 2016 7:13am EDT
 
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(This April 21 story fixes the headline to "miss" from"misses")

(Reuters) - Microsoft Corp (MSFT.O: Quote) reported results that fell short of analysts' expectations, showing its high-profile cloud business cannot quite make up for a slowing personal-computer market.

Shares fell 5 percent in after hours trade to $52.92.

Two of Microsoft's three major businesses showed lower operating profits, led by what Microsoft calls its intelligent cloud division, which includes its Azure cloud-services business as well as traditional server software. Despite revenue at Azure more than doubling, revenue in the division grew just 3 percent.

"We would have liked to have seen 7 to 9 percent growth," Dan Morgan, a portfolio manager at Synovus Trust who holds Microsoft shares, said of intelligent cloud revenue. "We're trying to validate this story that Microsoft is truly becoming a cloud company, and they're not going to be relying on the desktop computer."

Microsoft executives said that the shortfalls in the intelligent cloud business were due to pressure on products that were tangential to the main cloud push, such as server software, which mollified some investors.

"Microsoft's cloud business is gaining sales and momentum in the marketplace, so I am willing to give them the benefit of the doubt on this quarter's missed external expectations," said Matt McIlwain, a venture capitalist at Madrona Venture Group who watches Microsoft closely. "But, the combined top line and bottom line miss will raise the stakes for their final quarter of the 2016 fiscal year."

Revenue at the Redmond, Wash.-based software giant fell to $20.53 billion from $21.73 billion.

The company's net income in the third quarter ended March 31 fell to $3.76 billion, or 47 cents per share, from $4.99 billion, or 61 cents per share, a year earlier.   Continued...

 
The logo of Microsoft company is seen in Paris, France, April 18, 2016. REUTERS/Jacky Naegelen - RTX2AMBT