Microsoft Windows hurt by PC sales slump

Microsoft's quarterly profit has missed analysts' estimates as a continued slump in personal computer sales hurt the company's core Windows business.

The firm's net income fell to $3.76bn (£2.6bn) in the third quarter from $4.99bn a year earlier.

Its shares were down more than 4% in after hours trading.

Revenue in its cloud business, which includes Azure, rose 3.3% to $6.1bn, but operating profits at the division shrank 14%.

"We would have liked to have seen 7% to 9% growth," said Dan Morgan, a portfolio manager at Synovus Trust, which holds Microsoft shares, said of cloud revenue.

"We're trying to validate this story that Microsoft is truly becoming a cloud company, and they're not going to be relying on the desktop computer."

'Gaining momentum'

 

Revenue at the software giant fell to $20.53bn from $21.73bn, lower than the $22.09bn analysts had expected.

Continued weakness in the personal computing market hobbled demand for one-time licences for some of its products, the company said.

While some analysts are hungry for more growth from Microsoft, other analysts are adopting a wait-and-see approach.

"Microsoft's cloud business is gaining sales and momentum in the marketplace, so I am willing to give them the benefit of the doubt on this quarter's missed external expectations," said Matt McIllwain, a venture capitalist at Madrona Venture Group who watches Microsoft closely. 

Cloud shift

Kevin Turner, chief operating officer at Microsoft said: "Digital transformation is the number one priority on our customers' agenda. Companies from large established businesses to emerging start-ups are turning to our cloud solutions to help them move faster and generate new revenue."

Microsoft's chief executive Satya Nadella has focused on developing the company's cloud business since he took over in early 2014, with his "mobile first, cloud first" strategy.

Earlier this week US chipmaker Intel said it was cutting 12,000 jobs mainly due to lower demand in the personal computer market. Intel also said it wanted to "accelerate evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices".