Microsoft Posts Strong Quarterly Earnings While Preparing For Major Transition

msftOn Thursday after the closing bell Microsoft released their first quarter 2014 fiscal earnings that revealed strong earnings growth as the tech company expands its commercial services and prepares to make a deeper push into mobile computing through its recent acquisition of Nokia’s Devices and Services business.

Microsoft posted earnings of 62 cents a share with revenues of $ 18.53 billion, easily beating the consensus estimate of 54 cents on $ 17.8 billion, according to polls taken by Thomson Reuters.

Total net income was $5.2 billion, up from $4.5 billion in the same quarter last year.

Revenue from their consumer and devices unit, including Xbox and Surface tablets, grew 4 percent to $7.46 billion.

Surface revenue rose to $400 million as the number of Surface tablets doubled from the previous quarter when Microsoft was forced to take a $900 million charge from its Surface RT tablet.

Commercial revenue grew 10 percent to $11.20 billion and commercial cloud revenue grew 103 percent.

“Our new commercial services will help us continue to outgrow the enterprise market, and we are seeing lots of consumer excitement for Xbox One, Surface 2 and Surface Pro 2, and the full spectrum of Windows 8.1 and Windows Phone devices” Microsoft CEO Steve Ballmer said during the conference call.

Search ad revenue from Bing search engine was up 47 percent, led by an increase in revenue per search and volume.

Total online advertising revenue grew 13 percent but display ad revenue dropped 31 percent.

Windows OEM (original equipment manufacturer) revenue from their licensing partners fell 7.2 percent, a lower percentage level that Microsoft executives had estimated for the quarter.

Sales of Windows Pro to OEMs, including Dell, HP, and Lenovo grew 6 percent.

Revenue from Windows Phone OS (operating system) from its line up of smartphones increased $102 million as Microsoft seeks to make a larger investment in its smartphone business to better compete with Apple and Samsung.

Last month Microsoft agreed to pay € 3.79 billion to purchase Nokia’s Devices & Services business, and €1.65 billion to license Nokia’s patents, for a total transaction price of  € 5.44 billion in cash.

“We are making strategic investments in areas like technological innovation, supply chain management, and global cloud operations to build for the future and create long-term shareholder value” said Amy Hood, chief financial officer at Microsoft.

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