Microsoft Preps For A Payments Play — But First It’s Got To Survive

Microsoft’s future may include mobile payments, but that’s not what CEO Satya Nadella is worried about for the moment — his concern is surviving to get to that future. For that, the software giant’s Q1 results represented good news, beating analysts’ estimates and edging Microsoft back on track.

For the first three months of 2015, Microsoft said revenues were $21.73 billion, up 6 percent from the year-ago quarter, while earnings were 61 cents per share, down 10 percent — but still better than the expectations of analysts, which were for sales of $21.06 billion and profit of 51 cents, according to Thomson Reuters.

The good news was everywhere except Microsoft’s traditional PC business. Commercial cloud computing sales, including Office 365 and Azure, more than doubled over the past year (up 106 percent). The devices and consumer segment rose 8 percent year-over-year, including $713 million in Surface tablet sales, up 44 percent, and a 21 percent increase in Bing search advertising revenue. Xbox Live usage jumped 30 percent, though Xbox platform revenue was down 24 percent year-over-year.

Microsoft also sold $1.4 billion worth of Lumia smartphones during the quarter, a total of 8.6 million phones — up 18 percent from a year ago, though down from the 10.5 million phones it sold in the last three months of 2014.

But Windows revenue for businesses fell 19 percent, and dropped 26 percent for consumer versions of the operating system. In each case, that was much more than the 6.7 percent global decline in PC sales. Office commercial products and services revenue fell 2 percent. Overall, the commercial software business rose 5 percent to $12.8 billion, but that included cloud versions.

All those percentages would have been higher if not for the effects of the strong dollar.

Still, the January-through-March quarter (with is officially Microsoft’s Q3 for fiscal year 2015) was when Microsoft finally committed to several different payments plays. Most notably, it filed for money transmitter licenses in all 50 U.S. states, and was awarded its first such license by Idaho in late March. The company also registered as a money transmitter with the U.S. Treasury’s Financial Crimes Enforcement Network.

Microsoft also began striking deals during the quarter with current payments players, including PayPal (to support PayPal’s mobile app and card reader on Surface tablets) and MasterCard (to provide point-of-sale solutions for small merchants in Mexico). Along with Microsoft’s longstanding position in PC-based point-of-sale systems, the company seems to be getting set to make a serious run at payments — once it’s finally ready.