Microsoft shares slumped more than 3 percent after the company reported a net loss of $3.2 billion in the most recent quarter as it wrote down much of the value of its Nokia acquisition.
Total revenue fell 5 percent in the June quarter, with a 13 percent drop in Microsoft's Devices and Consumer division, which included a steep drop in revenue from Windows due to declining personal computer sales. Revenue in the commercial side of the business was little changed from a year earlier.
The loss resulted from $8.4 billion in charges and restructuring expenses, mostly related to the Nokia phone division, which has performed worse than expected since Microsoft bought it last year.
But Rob Helm, managing vice president with the research firm Directions on Microsoft, said even though the company is scaling back its smart phone ambitions, Microsoft still intends to keep making some hardware as a way to anticipate the next technological shift.
"Whatever comes next after phones and tablets, whether it’s virtual reality goggles or wearable devices, or who knows what, Microsoft may have a shot to get Windows reestablished and have it ride that wave the same way it rode the PC wave originally," Helm said.
Microsoft has to adapt to newer hardware as the market for PCs contracts. Helm says another way Microsoft is trying to stay relevant is by expanding beyond Windows machines. For example, the company now offers Microsoft Word and other programs for iPads.
And Helm said one silver lining is that the company’s cloud computing sales are growing. Revenue in that business climbed 88 percent in the June quarter. He says that indicates Microsoft is faring better than other tech stalwarts such as IBM.
“It’s going through a hard transition but other companies have been slower to make the transition and are going to be taking worse hits than Microsoft is," Helm said.
