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Microsoft's Quarterly Profit Hit By Charge For Layoffs Connected To Nokia Purchase

Mike Mozart

Microsoft’s profit dropped 11 percent in the most recent quarter, partly due to expenses connected to layoffs after the company’s purchase of the Finnish cell phone maker Nokia. 

Microsoft has cut almost 18,000 jobs in the past six months. So the company’s had to pay out severance packages and those restructuring costs shaved earnings by two cents a share in the quarter ended Dec. 31.

The company reported net income of $5.86 billion, or 71 cents a share, down from $6.56 billion, or 78 cents, a year earlier. Revenue rose 8 percent to $26.5 billion from $24.5 billion.

Morningstar analyst Norman Young says the purchase of Nokia hasn’t really started to pay off yet. He said handset sales of 10.5 million Lumia phones were "paltry" compared with sales of Apple iPhones.

`Nothing Really Terribly Impressive'

"Handsets were up quarter over quarter for the holiday quarter but nothing really terribly impressive there," Young said. 

Young says he does think Microsoft’s strategy on smart phones is a good one. The company introduced smart phones that cost less than $100 to gain traction overseas against Android models.

Overall, Microsoft's sales growth slowed from other recent quarters. The growth was hurt in part by a slump in PC sales now that a rush to replace old Windows XP machines is over.

Still, revenue from Microsoft’s cloud-computing business more than doubled. Morningstar analyst Norman Young says that’s a sign that Microsoft is getting more competitive with the dominant player in cloud computing: Amazon.

Cloud Computing

“With the strong growth numbers and from what we can see and what we’ve heard, features-wise and cost-wise, they certainly are at parity with Amazon Web Services, so it appears to me that they are making headway," Young said.

Microsoft has also been shifting customers to a different payment model and that’s affected sales growth. Under the new model, customers pay subscriptions to use software instead of buying each new version outright. 

In July 2017, Ashley Gross became KNKX's youth and education reporter after years of covering the business and labor beat. She joined the station in May 2012 and previously worked five years at WBEZ in Chicago, where she reported on business and the economy. Her work telling the human side of the mortgage crisis garnered awards from the Illinois Associated Press and the Chicago Headline Club. She's also reported for the Alaska Public Radio Network in Anchorage and for Bloomberg News in San Francisco.