From PC World: While Microsoft’s cloud business may have carried the company through the second calendar quarter, it’s also seeing the first effects of the massive restructuring of its phone business.
Microsoft said revenue in its phone business plunged 54 percent in “constant currency,” factoring out the ebb and flow of exchange rates over the course of the quarter. Worse still, executives said they expected a similar drop in revenue and gross margin for the current third calendar quarter. Overall, revenue in Microsoft’s “More Personal Computing” business dropped 17 percent to $9.3 billion.
In July, Microsoft said it would slash 7,800 jobs and take a $7.6 billion impairment charge on a deal it originally valued at $7.2 billion, meaning the Nokia acquisition was worth less than the paper it was written on. Chief executive Satya Nadella said at the time that that the company was moving from developing a standalone phone business to one that prioritized the Windows ecosystem.
To understand what Microsoft is trying to achieve in phones, you have to look far afield: its search business. The Bing search business is now profitable—a real milestone for Microsoft, according to chief financial officer Amy Hood—and worth over a billion dollars. Nearly 20 percent of search revenue during September was driven by Windows 10 devices, Microsoft said.
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