Microsoft sees demand from emerging markets: Amy Hood

Amy Hood, chief financial officer of Microsoft, said that the software giant is seeing demand from both developed and emerging markets. The U.S. and parts of Western Europe were particularly strong, while China was weak, in the first quarter of fiscal 2014.

Microsoft first quarter fiscal 2014 revenue rose 7 percent to $18.6 billion. Operating income declined 3 percent to $6.4 billion.

Gross margin grew 3 percent to $13.5 billion, reflecting the changing mix of its revenue.

Stever Ballmer’s departure is likely to reflect in the coming quarters. Microsoft is yet to announce its new CEO.

Despite challenges in global economy and execution of its new strategies — devices and services, for the current quarter, Redmond, Washington-based Microsoft forecast higher sales of its commercial products and services, which includes corporate sales of Office and server software, as well strong Xbox demand as a new game console is rolled out.

Amy Hood Microsoft

Microsoft Windows OEM business declined 7 percent. The company is seeing stabilization in business PCs which grew again this quarter and drove Pro revenue growth of 6 percent.

Consumer Office licensing revenue declined this quarter. The financial impact of the shift to Office 365 Home Premium was generally in line with its expectations.

Microsoft devices and Consumer Hardware segment revenue grew $401 million, driven almost entirely by Surface. Surface tablet is creating demand in retail and in education. Surface revenue grew to $400 million with sequential growth in revenue and units sold over the prior quarter.

Commercial business — both on-premise and cloud services — grew 10 percent this quarter.

Microsoft server product revenue grew 12 percent.

SQL Server revenue grew double-digits, with SQL Server Premium revenue growing over 30 percent.

Commercial Office products grew 11 percent.  Within this, SharePoint, Exchange and Lync collectively grew double-digits, with Lync growing nearly 30 percent.

Revenue for Microsoft Commercial Cloud services grew over 100 percent, as services such as Office 365 are integrated with Azure services, for comprehensive cloud solutions.  Microsoft is seeing strong customer adoption, with Office 365 seats and Azure customers both growing in triple-digits. Dynamics CRM Online is also expanding its base, with two-thirds of new Dynamics CRM customers opting for the cloud.

Future bright for Microsoft?

As per its new strategy, Microsoft will focus on software and devices.

The # software giant is already betting on devices business. Microsoft will have a variety of Windows-based devices in market.

Earlier this week, Microsoft launched Surface 2 and Surface Pro 2.

In November, Microsoft will launch its next generation console, Xbox One.

In Licensing, Microsoft expects revenue to be $5.2 billion to $5.4 billion.  Microsoft expects that the global business PC market to be stable, however, the consumer PC market is subject to more volatility.

Gartner says PC shipments fell 8.6 percent last quarter, confirming a worldwide trend towards tablets that has benefited Apple and Google but hurt traditional PC stalwarts Microsoft and Intel Corp.

In Hardware, Microsoft expects revenue to grow 35 percent to 45 percent to $3.8 billion to $4.1 billion, reflecting the expanded Surface line up, and the Xbox One launch.

Devices and Consumer Other revenue may touch $1.7 billion to $1.8 billion.

Commercial revenue will grow 9 percent to 11 percent.

In Commercial Licensing, Microsoft expects revenue to be $10.7 billion to $10.9 billion. This includes healthy renewals and annuity revenue growth from volume licensing with Software Assurance.

Microsoft says commercial cloud business and enterprise services will drive Commercial Other revenue to $1.7 billion to $1.9 billion.

Full year capital expenditures will be about $6.5 billion.

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