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Microsoft reports big losses in the fourth quarter

Nokia write down killed any chances of making a profit this quarter

Microsoft today reported its earnings for the fourth quarter of its 2015 fiscal year and unsurprisingly, the massive $7.6 billion write down for its Nokia purchase last year tanked any chances of it turning a profit. The write down pushed Microsoft's losses to $2.1 billion for the quarter. Excluding the write down and related charges, Microsoft's other businesses earned a profit of $6.4 billion on $22.2 billion in revenue.

The company notes that its revenue from Windows OEMs declined 22 percent due to cutting off support for Windows XP, but revenue from Microsoft's own Surface line grew 117 percent to $888 million on the backs of strong sales of the Surface Pro 3 and newer Surface 3. Microsoft's smartphone business actually grew 10 percent year over year to 8.4 million units, but lower average selling prices led to a revenue decline of 68 percent. The Xbox division managed to expand sales by 30 percent to 1.4 million for the quarter, however.

In more positive news, Microsoft's Office 365 subscriber base increased to 15 million, up nearly 3 million from the prior quarter. Margins also increased dramatically year over year, up to 26 percent from 17 percent for the same period last year.

All eyes are now on the Windows 10 launch next week

Looking forward, all eyes are on Windows 10, which launches officially next week. Microsoft has been in a transition period all year, as CEO Satya Nadella has made big changes to the company's structure and overall mission. The head of Windows, Terry Myerson, was recently put in charge of all of Microsoft's device business, filling the gaps left by Stephen Elop and Jo Harlow, both of whom recently left the company. Just today, a report from ZDNet says that Surface boss Panos Panay is being put in charge of engineering for the Premium Devices division under Myerson, which covers things like Surface, smartphones, Xbox, the Band fitness device, and the HoloLens augmented reality device.

By all accounts, it doesn't look like Windows 10 will be the mess that was Windows 8, but Microsoft will have to execute a flawless launch in order to really reap the benefits of the new platform in its business. The write down of the the Nokia assets came with massive cuts to the flailing smartphone business, and it's not clear how much longer Microsoft will subsidize it and keep it in its portfolio. For now, the company has pointed to the fall for new Windows 10 smartphones, which is when the platform will officially launch on mobile handsets. Beyond that, however, is anyone's guess.

Microsoft will be holding a call for investors at 5:30PM ET today and we will update this article with any newsworthy information that comes out of it.


Verge Video: Hands-on with Windows 10