Nokia Buy Is Final, But Four Months Later Than Microsoft Planned
Microsoft completed its buy of the Nokia Devices and Services business, Microsoft said Friday. That was about four months later than the economics of the deal that Microsoft outlined in September had assumed (CD Sept 4 p5), said Chief Financial Officer Amy Hood on an earnings call Thursday, citing the complexity of the purchase valued at more than $7 billion.
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Ex-Nokia CEO Stephen Elop was named executive vice president-Microsoft Devices Group, overseeing an expanded devices business at Microsoft that includes Lumia smartphones and tablets, Nokia mobile phones, Xbox hardware and Surface tablets. With the Nokia mobile phone business, Microsoft will “target the affordable mobile devices market, a $50 billion annual opportunity,” Microsoft said in a news release.
Microsoft has seen “some stabilizing” in the consumer PC market in developed markets, Hood said Thursday. But it was “very hard to separate cleanly the impact” of Microsoft ending Windows XP support from what is an “improving business PC refresh cycle as well as some positive macro-economic trends that we're seeing,” she said. Microsoft will “obviously learn more over the coming weeks” about what is causing improved PC sales, she said.
Total Microsoft Devices and Consumer revenue grew 12 percent in Q3 ended March 31 to $8.3 billion, it said in an earnings release. The growth was driven by Xbox One and Surface sales, as well as online advertising, it said in a 10-Q SEC filing. Devices and Consumer gross margin decreased “slightly, reflecting changes in the mix” of products and services sold in Q3, it said.
Surface revenue grew more than 50 percent in Q3 to about $500 million, said Microsoft. The mix of Surface sales in Q3 moved to its second-generation and Pro devices, and that change gave gross margin a lift in the quarter, said Hood. Microsoft again didn’t say how many Surface units it sold.
Total Microsoft Q3 gross margin slipped 8 percent to $14.5 billion. Total Q3 revenue was about flat at $20.4 billion and profit fell to $5.7 billion, or 68 cents a share, from $6.1 billion, or 72 cents, in Q3 last year.