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Microsoft Says That Chip Shortage Continues to Affect Windows, Office Until June

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Microsoft Says That Chip Shortage Continues to Affect Windows, Office Until June

Chip supply problems continue to have negative impacts on Microsoft cloud companies.

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During Q2 FY19, Microsoft's cloud companies and Surface grew solidly, while Windows OEM and Office Consumer products slowed partly due to chip supply problems.

Microsoft's earnings turned strong Q2 FY'19 on January 30. But Intel and others ' chip supply problems had some negative impact on Microsoft's quarter and will likely continue to do so throughout the June quarter, officials said.

Microsoft reported $32.5 billion in revenue and $8.4 billion in net revenue or $1.08 per share in Q2. Microsoft's "commercial cloud "revenue for the quarter was $9 billion, up from $6.1 billion in FY'18 for the same quarter. Office 365, Azure, Dynamics 365, and other Microsoft cloud services are included in the commercial cloud. Some company watchers wondered whether Microsoft's overall cloud growth would begin to slow significantly, but so far, this does not seem to be the case.

Office Commercial sales (meaning Office 365 and on-site Office products sold to companies) were strong in Q2 this year, with Office 365 Commercial seats increasing by 27 percent to approximately 197 million and revenues increasing by 34 percent. Teams, a group chat service from Microsoft that is one of the leading applications in the Office 365 suite, are now used by 420 million organizations, up from 329 million at the end of September. But Office 365 Consumer revenues for the quarter were low.

Office 365 Consumer subscribers reached 33.3 million, but overall, Office Consumer products and revenues fell by only one percent, compared with 12 percent in the comparable quarter of a year ago and 16 percent in Q1 FY19.

Officials said that Q1 FY19 was particularly strong because Microsoft launched its quarterly Office 2019, its on-site, non-subscription version. Since Microsoft had warned of planned price increases for Office 2019, some of its channel partners built up stock of the product before these increases came into effect, says Mike Spencer, Investor Relations Manager at Microsoft.

In addition, the PC market was weaker than Microsoft anticipated, reducing Office Consumer revenues by another four to five points, said Spencer. This problem with the supply of chips also affected Windows OEM Pro revenues, which fell by 5 percent in Q2 FY19.

In Windows PC news for the first time, Microsoft's Q2 FY19 was a big one for its surface business, with surface revenues increasing by 39 percent to $1.86 billion a quarter. Surface revenue was $1.34 billion a year ago in the same quarter.) Microsoft introduced a number of new Surface products last year, including Surface Go, Surface Laptop 2, Surface Pro 6, and Surface Headphones. While Surface is still a relatively small part of Microsoft's overall business, Spencer said it is one of the fastest growing companies in the company.

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Topics:
chip supply ,microsoft ,azure ,performance ,windows ,office ,cloud ,cloud services

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