Microsoft second quarter profits fall 10 per cent - 'integration and restructuring' blamed

Surface Pro 3 sales go up as Windows OEM revenues go down in a mixed quarter for Microsoft

Microsoft has reported second-quarter profits of $5.86bn, which represents a 10 per cent decline on the same quarter in 2014. Microsoft's official financial release cites "integration and restructuring", at a cost of $243m, as accounting for much of the decrease.

"Integration and restructuring expenses were $243m during the three months ended 31 December 2014," said Microsoft.

"Integration and restructuring expenses include employee severance expenses and costs associated with the consolidation of facilities and manufacturing operations, including asset write-downs and contract termination costs, resulting from Microsoft's restructuring plan."

The report goes on to say that "systems consolidation and other business integration expenses" are also involved, as well as transaction fees and "direct acquisition costs associated with the acquisition of NDS [Nokia's mobile phone business]".

It is, perhaps, not surprising that the reshuffle CEO Satya Nadella instigated when he took over, coupled with a new business focus, as well as the Nokia acquisition, have hit profits.

On the flipside, Microsoft has reported growth in areas Nadella - with his "cloud first, mobile first" mantra - is aiming at most.

The Microsoft Surface Pro, for example, saw sales jump 24 per cent to $1.1bn, thanks mainly to healthy demand for the Pro 3, which we liked when we reviewed it a few months back.

Office 365 has also seen a 30 per cent increase in subscriptions, and commercial cloud revenue has grown by 114 per cent.

But as Windows OEM Pro revenue went down 13 per cent, it's clear Microsoft is going to have to keep thinking up new ways to make money as the old "CD in a box" model is as good as dead.