Sales of Microsoft's Surface tablets and laptops have fallen by 26% in the third quarter of the current financial year, a drop of US$285 million compared to the figures for the corresponding quarter in the last financial year.
The company has put the fall down to increased competition in the niche from other hardware makers.
But on the cloud and Office 365 fronts, Microsoft fared well. In the Intelligent Cloud segment, which includes its Azure cloud offering, revenue for the third quarter came in at US$6.76 billion, a rise of 11% over the corresponding quarter in the last financial year.
In this segment, the revenue from server products and cloud services increased 15%, driven by Azure revenue growth of 93%. But Enterprise Services revenue decreased 1%.
{loadposition sam08}The Productivity and Business Processes segment, which includes Office, saw revenue climb 22% to US$7.96 billion.
Surface revenue has taken a tumble as competition from hardware manufacturers increases.
Revenue from Office commercial products and cloud services went up 7% with Office 365 enjoying commercial revenue growth of 45%. Office consumer products and cloud services revenue increased 15% and Office 365 consumer subscribers increased to 26.2 million. Revenue from Dynamics products and cloud services increased by 10% with Dynamics 365 the driver with revenue growth of 81%.
Overall, the company recorded revenue of US$22.2 billion with profits of US$4.8 billion.
Surface products are within the More Personal Computing segment which saw revenue fall 7% to US$8.84 billion. Other products in this segment saw rises: Windows OEM revenue increased 5%, Windows commercial products and cloud services revenue increased 6%, search advertising revenue excluding traffic acquisition costs increased 8% and gaming revenue went up by 4%.
This was the first quarter in which Microsoft included figures from LinkedIn, which it bought in December 2016 for US$27 billion.
LinkedIn added US$975 million in revenue, but Microsoft reported a US$386 million operating loss.
Microsoft chief executive Satya Nadella said: "Our results this quarter reflect the trust customers are placing in the Microsoft Cloud.
"From large multinationals to small and medium businesses to non-profits all over the world, organisations are using Microsoft’s cloud platforms to power their digital transformation."
Images: Courtesy Microsoft