Microsoft Corp., which last week announced the biggest job cuts in company history, reported a quarterly profit Tuesday that fell short of estimates in its fiscal fourth quarter, weighed down by the acquisition of Nokia Oyj's handset business.
Meanwhile, Apple Inc.'s earnings topped analysts' projections for the company's fiscal third-quarter report. Apple sold 35.2 million iPhones. That was a 13 percent increase from the same period last year, even though many people are thought to be holding off on new device purchases until the next version comes out this fall.
Net income for Microsoft in the period that ended June 30 was $4.61 billion, or 55 cents a share, on sales of $23.4 billion, Redmond, Wash.-based Microsoft said in a statement Tuesday after the stock market closed. Analysts were projecting profit of 60 cents per share and revenue of $23 billion, according to the average of estimates compiled by Bloomberg. Excluding results from Nokia, profit would have been 63 cents a share, compared with an average prediction of 64 cents, based on estimates from seven analysts.
Chief Executive Officer Satya Nadella, who took over in February, is struggling to make Microsoft's smartphones and tablets more appealing to consumers, who are opting for products that are made by Apple Inc. or run Google Inc. software. The earnings results underscore the challenges facing Nadella as he contends with a personal computer market that's on track to shrink for a third straight year in 2014.
Unearned revenue, which comes from sales of multiyear deals that will be recognized in the future, was $25.2 billion for the quarter, compared with the $24.5 billion average analyst projection, according to data compiled by Bloomberg.
Microsoft shares fell in extended trading after the report's release. They were little changed at $44.83 at the close of trading in New York. The stock climbed 1.7 percent last quarter, compared with a 4.7 percent increase in the Standard & Poor's 500 index.
In addition to a plan to cut 18,000 jobs as the company integrates Nokia's handset unit, acquired in April, Nadella has discontinued unpromising products and placed more emphasis on cloud-computing software delivered via the Web. The restructuring will result in $1.1 billion to $1.6 billion in charges in the current fiscal year, according to Microsoft. The company didn't say last week how much it expects to save from the firings.
Microsoft is seeing signs of improvement in the personal computer market, which drives sales of Windows and Office software. Computer shipments declined 1.7 percent in the second quarter, a smaller drop than estimated as businesses upgraded their equipment. Demand in the U.S., Europe and Canada also helped to make up for a drop in Asia, researcher IDC said earlier this month.
"The strength in the enterprise and the comments on the refresh would seem to bode well for Microsoft continuing to have uptake with enterprise sales," said Michael Shinnick, a fund manager at South Bend, Ind.-based Wasatch Advisors Inc., which has $19 billion under management.
Apple's growth prospects are looking brighter as anticipation builds for the coming release of the next iPhone, a model that is expected to cater to consumers yearning for a bigger screen.
"From an execution perspective, we did a really great job," Apple Chief Financial Officer Luca Maestri said Tuesday. "We have some things in the pipeline that we think people will really be excited about."
Apple's quarterly earnings report was also released after markets closed Tuesday.
Apple earned $7.7 billion, or $1.28 per share, for the three months ending June 28. That represented a 12 percent increase from income of $6.9 billion, or $1.07 per share, at the same time last year.
The earnings per share for the latest quarter exceeded the average estimate of $1.23 per share among analysts surveyed by FactSet.
Revenue rose 6 percent from last year to $37.4 billion -- about $600 million below analysts' forecasts.
If media reports based on leaks from Apple suppliers prove accurate, the iPhone 6 will boast a screen of at least 4.7 inches compared with the 4-inch display that the company switched to in 2012. Some analysts also have been speculating Apple will simultaneously unveil an iPhone with a 5.5-inch screen.
An iPhone with a larger screen probably would unleash a flood of sales among Apple fans interested in a smartphone that would make it easier to read and see other features. A bigger-screen iPhone might also tempt consumers already accustomed to the larger screens on a variety of smartphones running on Google Inc.'s Android operating system.
Propelled by high hopes for the next iPhone and the potential release of a smartwatch, Apple's stock has surged 18 percent this year. After closing at $94.72 Tuesday, the stock is just $6.01, or about 6 percent, away from setting a new high.
Information for this article was contributed by Dina Bass of Bloomberg News and staff members of The Associated Press.
Business on 07/23/2014