Microsoft cut forecast for profit and revenue in fourth-quarter

US-based technology major Microsoft has cut its fourth-quarter forecast for profit and revenue due to forex related issues.
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A hawkish Federal Reserve and heightened geopolitical tensions have driven a 14 percent gain in the dollar against a basket of currencies over the last year.

A stronger greenback eats into the profits of companies that have sprawling international operations and convert foreign currencies into dollars.

“Software companies including Microsoft significant operations outside the U.S. and Microsoft is being prudent here to get ahead of (market) expectations and be transparent around currency impacts, said Steve Koenig, managing director at SMBC Nikko Securities.

Microsoft, which gets about half its revenue from outside the United States, has lowered its revenue forecast for all three segments, which include Windows products, cloud services and personal computing.

It is common for companies to protect themselves from unexpected forex moves, but the urgency comes after years of muted forex volatility, during which currency fluctuations had limited impact on earnings.

The tech giant expects revenue for the quarter to be between $51.94 billion and $52.74 billion, down from its prior range of $52.40 billion to $53.20 billion.

It cut the profit view to between $2.24 and $2.32 per share from a prior expectation of between $2.28 and $2.35 per share.

Microsoft in April forecast double-digit revenue growth for the next fiscal year, thanks to demand for its office software and cloud services as economies reopen and businesses shift to a hybrid model of allowing staff to alternatively work from office and home.