Shares of Microsoft plunged more than 4% in after hour trading after what many analysts considered to be disappointing Q2 financial results.
The company saw revenue rose by 8% compared to last year's but the cost of revenue went up significantly as well which means that the operating income fell slightly.
Add in other one-time accruals (like tax payments linked to an IRS audit adjustment and restructuring expenses) and the earnings per share dropped by 9%.
Revenue associated with the company's Device and Consumer licensing business went down by a quarter. Windows Phone as well as Microsoft's licensing changes to Windows may explain this sudden drop and why it may only be the beginning.
Microsoft is selling more smartphones than ever before (more than 10 million in the last quarter) and the number of Office 365 subscribers should breach the 10-million barrier soon.
Office 365 Business, Azure and Dynamics CRM Online more than doubled the quarterly revenue figures for Microsoft Commercial Cloud segment.
Make no mistake, it's the B2B business arm of Microsoft's that generating the profits and paying shareholders. Two thirds of its gross margin comes from it and it is growing.
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