Business Technology

Saturday 30 August 2014

Microsoft beats Wall Street on Nadella's debut

Published 25/04/2014 | 07:45

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Satya Nadella, executive vice president, Cloud and Enterprise, addresses employees during the One Microsoft Town Hall event in Seattle, Washington in this July 11, 2013 photo made available to Reuters on January 30, 2014. Microsoft Corp's board is preparing to name internal cloud-computing head Satya Nadella as the software company's next chief executive, Bloomberg reported on Thursday, citing unnamed sources it said were briefed on the CEO search process.  REUTERS/Microsoft/Handout
Satya Nadella

Microsoft Corp's (MSFT.O) new chief executive got off to a winning start with Wall Street as the world's largest software company eased past analysts' profit estimates despite the pressure of falling computer sales.

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Its shares rose almost 3 percent in after-hours trading to $40.96, keeping the stock at levels not seen since the turn-of-the-century Internet stock boom.

Microsoft shares are up about 8 percent since company veteran Satya Nadella took over as CEO in early February, and are up 19 percent since his predecessor Steve Ballmer announced plans to retire last August, easily outpacing the Standard & Poor's 500 .SPX.

Investors are excited about Nadella's focus on mobile and cloud, or Internet-based, computing, designed to take Microsoft beyond its traditional PC-based Windows business. Nadella is set to face analysts' questions for the first time in public on a conference call later on Thursday.

"This quarter is a nice step in the right direction for Nadella and Microsoft," said Daniel Ives, an analyst at FBR Capital Markets. "We would characterize these results as solid in a choppy IT spending environment."

Nadella's emphasis on cloud computing helped its server software business, while a softer-than-expected decline in PC sales limited damage to the bottom line.

The Redmond, Washington-based company reported quarterly profit of $5.66 billion, or 68 cents per share, compared with $6.05 billion or 72 cents in the year-ago quarter.

The decline was exaggerated by deferred revenue boosting the year-ago figure, and the latest quarter's profit beat Wall Street's average estimate of 63 cents per share, according to Thomson Reuters I/B/E/S.

Sales fell 0.4 percent to $20.4 billion, meeting analysts' average estimate.

Personal computer sales fell by as much as 4.4 percent in the quarter, according to the two major technology research firms, making the eighth straight quarter of declines as tablets and smartphones gain in popularity.

That decline was likely muted by the end of Microsoft's support for its decade-old Windows XP system in early April, which appears to have prompted many people to buy a new computer.

Reuters

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