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The honeymoon is over: $700 million Nokia loss causes Microsoft profits to fall 7%

The honeymoon is over: $700 million Nokia loss causes Microsoft profits to fall 7%

Microsoft's (NASDAQ:MSFT$7 billion acquisition of Nokia's Devices & Services division continues to drain money away from the Redmond giant, with profits falling 7 percent in the company's latest quarter thanks to losses at the Finnish firm.

Nokia lost $692 million in Microsoft's second quarter of 2014, shifting 5.8 million smartphones worldwide in the process.

Though Microsoft itself posted a healthy profit of $4.6 billion, that's down on the $4.97 billion in posted during the same period in 2013.

Tale of two companies

Microsoft recently announced the culling of 18,000 jobs over the course of the next 12 months, with 13,000 going at Nokia.

Nevertheless, despite Nokia's continued struggle to gain a foothold in vital global markets for both itself and Microsoft's Windows Phone OS, Windows as a whole – now also deployed across tablets – enjoyed a strong quarter.

Nokia's flagship phablet Lumia 1520

Sales of Windows and Office (amongst other products) jumped 10.5 percent, itself a broader rise than in previous quarters. Surface revenue came in at $409 million, with Microsoft citing the "second generation Surface 2 and Surface Pro 2 devices, and the recent launch of Surface Pro 3" as the triggers behind the success.

The long game

Microsoft is also driving more profit from its software line-up, meaning the company as a whole typically looks in rude health.

On the games front, Microsoft sold a solid 1.1 million Xbox Ones and Xbox 360s across the quarter.

"We are galvanised around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution," said recently appointed CEO Satya Nadella.

"I’m proud that our aggressive move to the cloud is paying off – our commercial cloud revenue doubled again this year to a $4.4 billion annual run rate."

The company notes that Nokia will continue to be a drain on profits until its job cuts are completed, though its place within the Windows ecosystem is seen as key, with Lumia customers signing up to many of Microsoft's software services by default.

[source: Microsoft]

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With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.

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