Microsoft Corporation Hurt By Nokia; iPad Disappoints Apple Inc. Investors

iphone 8 apple stockElisaRiva / Pixabay

Tech giants Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL) reported their June quarter results on Tuesday after the market closed. Microsoft exceeded revenue estimates but missed on earnings. In contrast, Apple’s earnings came in better than expected, but revenues missed the Wall Street expectations. Microsoft’s results clearly showed that the company is still enduring the Nokia hangover.

Nokia unit costs Microsoft 8 cents in net income

The Redmond-based company posted earnings of 55 cents with $23.38 billion in revenues. Excluding one-time items, Q2 earnings came in at 58 cents. Microsoft’ earnings missed the consensus estimate of 60 cents a share, though revenues exceeded analysts’ expectations of $23 billion. The software giant said that its newly acquired handset unit cost the company 8 cents in net income as Nokia unit continues to incur losses.

Microsoft has announced to slash 18,000 jobs, mostly related to the acquisition of Nokia’s device unit. But that’s a time-consuming process. The company said it sold 5.8 million Lumia handsets and 30.3 million non-Lumia devices. The phone sales generated revenue of $1.99 billion. Moreover, Microsoft admitted that ‘majority’ of Lumia smartphones were shifted at lower prices.

Microsoft CEO Satya Nadella painted a positive picture by focusing on cloud computing. Revenues from the commercial cloud division more than doubled to $4.4 billion. Nadella also confirmed that the next iteration of Windows will have a unified interface across multiple form factors of devices. Microsoft will simplify Windows platform to make it easy for developers to create apps.

iPad sales falling

Apple reported better than expected earnings of $1.28 per share or $7.7 billion, 12% higher than last year’s $6.9 billion or $1.07 a share and well above the consensus estimate of $1.23 per share. However, revenues of $37.4 billion missed the consensus estimate of $38 billion. During the June quarter, the Cupertino-based company shipped 35.2 million iPhones. Apple sold 4.4 million units of Mac, driven largely by MacBook Air.

But the iPad sales once again disappointed investors. Apple sold 13.28 million iPads during the three-month period ended June 38, down 9% from 14.6 million in the same quarter last year. Analysts expected the iPad sales to come in above 14 million units. It’s not the first quarterly sales decline; the iPad sales plunged 16% during the previous quarter.

Moreover, the expected launch of the big-screen iPhone 6 in September could further hurt the iPad sales, as consumers could buy a phablet iPhone and avoid the iPad. But Tim Cook pointed to Apple’s recent deal with International Business Machines Corp. (NYSE:IBM) for the future of the iPad. Enterprise sector represents a huge opportunity for the iPad.

Apple shares rose 0.75% to $95.43 in pre-market trading Wednesday.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at [email protected] and on Twitter @VikShukla10

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