Microsoft Q2 profit falls on sluggish demand for Windows, currency pressure

Microsoft Corp, the US-based technology major, on Monday reported a fall in its quarterly profit that was in line with Wall Street forecasts, as sluggish personal computer sales dampened demand for Windows software and the company struggled with the impact of the strong US dollar.

Microsoft reported profit of US $5.86 billion, or 71 cents per share for the latest quarter, compared with US $6.56 billion, or 78 cents per share, in the year-ago quarter.

Sales rose 8 per cent to US $26.47 billion, largely due to the acquisition of Nokia's phone handset business in 2014.

Analysts had expected revenue of US $26.3 billion and earnings of 71 cents per share, on average, including some restructuring costs.

"While currency is a headwind for Microsoft and other large international companies, we would characterize the headline numbers as good enough, although some bulls may have been hoping for a bigger beat," said Daniel Ives, an analyst at FBR Capital Markets.

Microsoft's flagship Windows business has been under pressure for three years as PC sales have declined, although the market appears to be stabilising in recent months.

Currency shifts against the strong US dollar also crimped profit in the second quarter, ended December 31, 2014, although Microsoft did not specify by how much. The software major gets almost three-quarters of its revenue from overseas, but a significant amount of that is still in US dollars.

"Overall, the only surprise I think was in commercial licensing, where we had a little bit of a headwind from foreign exchange as well as macro conditions in China and Japan," said Microsoft Chief Financial Officer Amy Hood in a telephone interview with Reuters.

Commercial licensing is chiefly sales of Windows and Office to business customers, which is Microsoft's biggest revenue generator.

(Reuters)