Microsoft Sales Tops Estimates as Nadella Revamp Advances.

http://www.bloomberg.com/news/2014-10-23/microsoft-profit-sales-beat-estimates-on-recovering-pc-market.html

Microsoft Corp. (MSFT)’s quarterly sales topped estimates on cloud-computing growth and recovering personal-computer sales, as Chief Executive Officer Satya Nadella shows progress in his effort to revive the company.

Revenue at the ailing Nokia handset business, which Microsoft acquired earlier this year, also topped projections, while sales of Azure cloud software and Web-based versions of Office programs more than doubled. Total revenue in the first fiscal quarter, which ended Sept. 30, rose 25 percent to $23.2 billion, compared with analysts’ average estimate for $22 billion, according to data compiled by Bloomberg.

The results bolster Nadella’s view that the world’s largest software maker needs to focus on Web-based services and mobile devices. After taking over in February, Nadella unveiled plans to cut 18,000 positions, the biggest-ever job cuts in the company’s history. By underpromising and overdelivering, he’s keeping up a “positive momentum” with investors, according to Daniel Ives, an analyst at FBR Capital Markets & Co.

“This quarter was another step in the right direction for Microsoft,” said Ives, who has the equivalent of a buy rating on Microsoft’s stock. “Cloud continues to put fuel in the engine for Microsoft as Nadella looks to steer this company towards its next chapter of growth.”

Another bright spot was Surface, Microsoft’s tablet computer that was introduced two years ago, only to struggle to gain market share. Revenue from the devices rose to $908 million as the Surface Pro 3 outsells the previous version by a 2-to-1 margin, the company said.

Phone Business

The unit that includes the Nokia business posted sales of $2.61 billion, beating the $2.1 billion average estimate of analysts, according to data compiled by Bloomberg. The number was also ahead of Microsoft’s internal forecast, according to Chief Financial Officer Amy Hood.

“We have work to do on phones but we are seeing Lumia share growth in key markets,” Hood said. “That being said, we know this is a long road.”

Microsoft will drop the Nokia name from phones and instead brand them Lumia, a change the company signaled when it announced the acquisition.

For the current quarter, Hood forecast phone hardware revenue of as much as $2.2 billion.

Cloud Performance

While the results show progress in mobile and cloud, there’s a ways to go, Forrester’s Gillett said.

“These numbers aren’t going to transform their role in mobile and cloud but it keeps them in the game,” Gillett said.

Microsoft Corp. claims Samsung Electronics Co. is using Microsoft's acquisition of Nokia Oyj’s phone business as an excuse to stop complying with the contract.