Microsoft Pivots Away from PC

July 2014 by: Alpha Tech

It is earnings season on Wall Street and few companies garner analyst attention the way Microsoft does.  Along with the announcement of its fourth quarter 2014 financial results (three months ended June 30, 2014) Microsoft, now under recently appointed CEO Satya Nadella, also announced a series of changes to its core business strategy.


The company also announced it would cut 18,000 jobs or 15% of its workforce (the most in its history) the majority of which will come from the Nokia division.As for headline figures the tech giant reported a revenue jump of $23.38B from $19.9B a year earlier and profit of $4.61B compared with $4.97B during the same period last year. As for its business segments the company’s Nokia division, which it acquired in April for $7B, sold almost $2B in phones but posted a net loss of $692M. Microsoft’s commercial cloud business thrived with revenue growing almost 150% with an annualized run rate that exceeds $4.4B. Immediate investor reaction to the announcement was relatively muted although Microsoft stock has gained almost 20% since CEO Nadella was appointed in February (see chart).


The company also announced it would cut 18,000 jobs or 15% of its workforce (the most in its history) the majority of which will come from the Nokia division. 


Our Take Having been at the helm for almost 6 months these financial results and announcement have Microsoft’s new CEO’s prints all over them. CEO Nadella has made no secret of his desire to focus in on cloud infrastructure services – a focus that seems to be paying off.


As for the Nokia division, investors were skeptical with the acquisition but decided to get behind Nadella’s mobile-first vision. The announcement in job cuts may go some way in alleviating investor nerves in this regard. Microsoft is in a phase of change with new acquisitions and strategy shifts and given its size will remain as such for some time. While investors may grow increasingly antsy, it seems that CEO Nadella has recognised the need to be adaptive in today’s changing and increasingly competitive tech world.