Microsoft stock buoyed despite quarterly profit dip

April 25, 2014 // 10:53 a.m.

Tags: #financial #microsoft #q3-2014 #satya-nadella #surface #surface-2-surface-rt #surface-pro-2 #windows #windows-rt #xbox #xbox-one

Investors have remained bullish following Microsoft's latest financial results, despite a drop in net income of nearly seven per cent and a serious dip in the company's Surface sales.

Released late last night during an earnings call with press, investors and analysts, Microsoft's latest figures reveal an impressive $20.4 billion revenue and a net profit of $5.66 billion for the company's third quarter of the 2014 financial year. Despite facing a small revenue shortfall of 0.4 per cent year-on-year and a drop in net profit of 6.6 per cent over the same period, the figures showed growth in several areas including a 12 per cent boost in the company's Devices and Consumer division revenue by 12 per cent to $8.3 billion.

One lowlight of the call, however, was the performance of Microsoft's Surface division. Its first attempt to break into the PC market with own-brand products, the initial Surface line-up - the Windows RT-based Surface and Windows 8-based Surface Pro - proved extraordinarily difficult to sell into a market tied up by iOS and Android devices, leading to a massive loss for the company. Price cuts followed by the launch of the Surface 2 and Surface Pro 2, both of which address criticisms of their predecessors, help boost sales but with Microsoft refusing to release figures it was not know by how much.

While the company didn't break with tradition and detail how many Surface tablets it has sold over the quarter during the call - despite name-dropping two million Xbox consoles, 1.2 million of which were Xbox One units, having been sold over the same period - it did admit that revenue from Surface tablet sales was a mere $500 million compared to $893 million in the prior quarter. That's a significant dip, even during the traditional post-Christmas slump, but the company was quick to point out that it still sits a comfortable 50 per cent higher than the same period last quarter.

With analysts having predicted roughly even revenue and an even bigger drop in profits, investors appear confident that Microsoft is on-track under new chief executive Satya Nadella. The company's share price rose 2.06 per cent in pre-market trading following the earnings call.

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