Microsoft rides high on hot demand for cloud products

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Microsoft rides high on hot demand for cloud products

Microsoft reported quarterly revenue and profit that beat analysts' expectations, driven by aggressive cost cutting and growing demand for its cloud products and services.

Microsoft, under chief executive Satya Nadella, has been focusing on cloud services and mobile applications as growth slows in its traditional software business. The cloud, in which growing numbers of companies move much of their information technology off premises, proved a bright spot for the software giant.

Up to Thursday US time's close of US$52.05, Microsoft's stock had climbed more than 26 percent in the past 12 months as investors showed their confidence in Nadella's growth strategy.

The shares rose 5.3 percent in after-hours trading.

Revenue from the company's increasingly important "Intelligent Cloud" business, which includes products such as servers and platforms such as Azure cloud infrastructure and services, rose 5 percent to US$6.3 billion.

The company's combined cloud business was on track for US$9.4 billion in annual revenue, the company said, up 15 percent from the US$8.2 billion revenue it estimated last quarter.

"They nailed the cloud," said Matt Howard, a venture capitalist at Norwest Ventures who monitors Microsoft closely.

Total revenue, however, fell 10.1 percent to US$23.80 billion, squeezed by a strong US dollar as well as a weak personal computer market that has reduced demand for Microsoft's Windows operating system. On an adjusted basis, revenue fell to US$25.69 billion but beat analysts' estimates.

Revenue in the business that includes Windows fell 5 percent to US$12.7 billion.

Windows revenue closely tracks sales of personal computers, which fell 10.6 percent globally in the December quarter from a year earlier, according to research firm IDC.

IDC said business should improve later this year as companies that had delayed replacing machines before upgrading to Windows 10 make the switch. Windows 10 was released last year.

Microsoft generates more than half of its revenue from outside the United States, so is susceptible to big shifts in exchange rates.

The average value of the US dollar, as measured against a basket of major currencies, was 11.7 percent higher in the last quarter of 2015 compared with the same quarter of 2014.

The company's net income fell to US$5 billion, or 62 US cents per share, in its second-quarter ended 31 December from US$5.86 billion, or 71 US cents per share, a year earlier.

Excluding items, the company earned 78 US cents per share. Analysts on average had expected a profit of 71 US cents per share and revenue of US$25.26 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Abhirup Roy in Bengaluru and Sarah McBride in San Francisco; Editing by Ted Kerr, Bernard Orr)


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