Microsoft income hit by Nokia devices and tablet inventory woes

The cloud might be growing but Microsoft's Q4 numbers also revealed the extent to which the Nokia devices business has impacted the firm as well as more inventory tablet issues

The reason for the significant job cuts announced by Microsoft last week have started to become clearer with the vendor revealing the extent to which the Nokia business is impacting the rest of the firm.

The acquisition of the Nokia Devices and Services business was completed in April and although the organisation contributed $1.99bn in revenue it also negatively hit operating income to the tune of $692m.

The red ink was not just limited to the Nokia business column and there was also a $900m hit to operating income and a $38m impact on revenue from the Surface RT inventory adjustments.

Aside from the Nokia business and tablet inventory issues there were signs that the push to the cloud is delivering results for Microsoft and that gave the CEO Satya Nadella something to concentrate on in his remarks on the Q4 numbers.

“We are galvanized around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution,” added Nadella “I’m proud that our aggressive move to the cloud is paying off – our commercial cloud revenue doubled again this year to a $4.4bn annual run rate.”

For the three months ended 30 June revenues climbed by 18% to $23.38bn and operating income also managed a 7% improvement to $6.48bn. The firm reported a 42% improvement in revenues in its devices and consumer business with the turnover from the Windows OEM business improving by 3% and Office 365 home and personal subscribers hitting 5.6m.

Commercial cloud revenue grew by 147% and Windows volume licensing improved year-on-year by 11% and the demand for server products, which includes Azure was up by 16%.

The decision to make thousands of redundancies will have an impact on results going forward with the plans likely to cost up to $1.6bn to be made in the first half of the 2015 fiscal year.

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