Nokia deal flop drags Microsoft to largest loss to date

A $7.5bn writedown means handset unit has lost almost all it s value in just over a year

 

Microsoft reported its largest-ever quarterly net loss, hurt by a $7.5 billion writedown after the purchase of Nokia’s handset unit failed to rescue the company’s mobile business.

Excluding the Nokia charge and costs related to job cuts, Microsoft said profit in the fourth quarter, which ended June 30th, was 62 US cents a share. Sales were $22.2 billion.

Analysts,on average, had projected profit of 58 cents on sales of $22 billion.

Revenue from Microsoft’s cloud business rose on continued growth in the Azure and Office 365 programs. The gains were overshadowed by the writedown, an acknowledgment that the Nokia deal had lost almost all its value after a little more than a year.

Chief executive Satya Nadella announced 7,800 job cuts and said he plans to narrow the focus of the mobile business to try to win customers in specific markets.

“Enterprise demand is continuing to crank along – that’s a bright spot,” said Colin Gillis, an analyst at BGC Financial LP in New York. “Consumer demand continues to be weak.”

Microsoft shares slipped as low as $45.82 in extended trading after closing at $47.28.

The shares rose 8.6 per cent in the quarter, while the Standard & Poor’s 500 Index fell less than 1 percent.

Including the writedown of its Nokia purchase and other restructuring charges, the net loss in the fourth quarter was $3.2 billion, or 40 cents a share, the company said Tuesday in a statement.

Microsoft acquired the phone unit in April 2014 for $9.5 billion, including $1.5 billion in acquired cash. The addition of the unit – a deal struck under former CEO Steve Ballmer, Mr Nadella’s predecessor – was a flop, and Microsoft’s smartphone business continued to lose money while gaining little ground with mobile users.

Last month, Mr Nadella unveiled the biggest management overhaul in his 18 months as CEO.

Former Nokia chief executive Stephen Elop is exiting as Microsoft’s hardware chief as the company consolidates that business with its Windows division.

Three other senior leaders, including Mark Penn, a former adviser of President Bill Clinton, are also leaving the company. – Bloomberg