Microsoft share price: Cloud software shows strength in Q4

on Jul 23, 2014
Updated: Jun 1, 2022
Listen, Wednesday, July 23: Microsoft Corp (NASDAQ:MSFT) yesterday reported fourth-quarter profit that missed analysts’ expectations, mainly due to incorporating the Nokia phone unit it acquired earlier this year.

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However, the hit to Microsoft’s bottom line was overshadowed by the positives in the company’s fourth-quarter report, which showed that overall, the Redmond-based technology giant had enjoyed a strong performance during the final three months of its fiscal year. The company’s core software business performed strongly, with cloud and enterprise software standing out. Microsoft also pledged to take action to get the Nokia unit to break even within two years, which contributed to a rise of its share price during extended trading.

In today’s pre-market trading, Microsoft shares were up 2.3 percent at $45.85 as of 12:58 BST. At yesterday’s close in New York, the company’s stock had risen 19.8 percent on the year.
**Nokia Devices and Services**
Microsoft’s fourth-quarter net profit declined seven percent to $4.6 billion, or 55 cents a share, from $5 billion, or 59 cents a share, a year earlier. The result missed analysts’ expectations for EPS of 60 cents. The main factor behind the profit decline was Nokia Devices and Services, which reduced the company’s operating profit in the quarter by nearly $700 million. The unit added almost $2 billion to Microsoft’s quarterly revenue, but posted an operating loss of $692 million, which included some one-off costs. Without the negative impact of the unit, Microsoft’s earnings in the quarter would have been 66 cents a share, beating the average prediction for 64 cents, Bloomberg estimated.

Microsoft, however, said that it aims to cut $1 billion in costs at the unit and halt its losses by the end of fiscal 2016 following a massive round of lay-offs announced last week. The company’s intention to put an end to the business’ money-losing streak spurred optimism among analysts.
“The expense guidance around Nokia was much better than feared,” Reuters quoted FBR Capital Markets analyst Daniel Ives, as observing. “While there is still some heavy lifting ahead, it appears brighter days are on the horizon for Microsoft after a decade of pain and frustration.”

Meanwhile, Microsoft posted a significant improvement in revenue, which came in at $23.3 billion, up 18-percent from a year earlier and above the average analyst forecast of $23 billion. The company made further progress in its cloud services business, with commercial cloud, which includes its Azure computing service, generating $4.4 billion in annual revenue. Office 365, the web version of Microsoft’s productivity suite, continued to add subscribers at a strong pace.

“Cloud looked strong – core PC seemed to get an uplift from improving PC demand,” Ives told Bloomberg. “Office 365 and Azure continue to be pillars of strength. I would call this in-line results.”
Overall, Microsoft’s commercial revenue grew 11 percent to $13.48 billion. Boosted by the fresh contribution from Nokia Devices and Services, devices and customer revenue jumped 42 percent to $10 billion.
**Analysts on Microsoft**
According to the Financial Times, the 26 analysts offering 12 month price targets for Microsoft have a median target of $44.00, with a high estimate of $54.00 and a low estimate of $34.00. As of July 18, 2014, the consensus forecast amongst 47 polled investment analysts covering Microsoft advises investors to hold their position in the company. The same consensus estimate has been maintained since the sentiment of investment analysts deteriorated on July 19, 2013, the FT notes.
**As of 13:58 BST buy Microsoft shares at $45.58**
**As of 13:58 BST sell Microsoft shares at $45.56**


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