Microsoft share price falls on commercial revenues miss

on Jan 27, 2015
Updated: Oct 21, 2019
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Microsoft Corp (NASDAQ:MSFT) yesterday posted its financial results for the second quarter of its fiscal year, with the numbers broadly in line with expectations but licence fees down. The company reported revenue of $26.47 billion, up eight percent from a year earlier. The increase was largely due to the acquisition last year of Nokia’s handset business.

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Microsoft’s second-quarter profit declined to $5.86 billion, or 71 cents per share, from 6.56 billion, or 78 cents per share, in the corresponding quarter a year earlier. Analysts had been expecting earnings of 71 cents a share on revenues of $26.3 billion.
A surprise in the report was the bigger-than-expected slowdown in the growth of commercial licensing revenue, which comprises mainly sales of Windows and Office to business customers. Microsoft also suffered from a profit-curbing strong US dollar. The company’s financial forecast for the remainder of the fiscal year came in below analyst expectations, with the tech behemoth expressly citing the strength of the USD.

“While currency is a headwind for Microsoft and other large international companies, we would characterize the headline numbers as good enough, although some bulls may have been hoping for a bigger beat,” Reuters quoted FBR Capital Markets as observing.
Meanwhile, a strong point in the report was the continuing growth of Microsoft’s cloud services business, which is the centrepiece of the company’s new strategy. The software maker revealed that sales in its cloud enterprises had more than doubled in the quarter to $1.3 billion.

“Microsoft is continuing to transform, executing against our strategic priorities and extending our cloud leadership,”group CEO Satya Nadella commented. “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.”
In yesterday’s after-hours trading, Microsoft shares fell 4.3 percent to $45.00. The shares had closed at $47.01 in the regular trading session, giving the company a market capitalisation of $390.23 billion.
According to the Financial Times, the 31 analysts offering 12 month price targets for Microsoft have a median target of $52.00, with a high estimate of $58.00 and a low of $34.00. As of January 24, the consensus forecast amongst 44 polled investment analysts covering Microsoft has it that the company will outperform the market. This consensus forecast has been maintained since September 15 last, when sentiment of investment analysts improved from “hold”.
As of 10:02 GMT, Tuesday, 27 January, Microsoft Corporation share price is $47.01.

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