Why Investors Are Pleased with Microsoft's Fiscal 2Q16 Results

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Part 2
Why Investors Are Pleased with Microsoft's Fiscal 2Q16 Results PART 2 OF 10

How Did Microsoft’s Operating Segments Perform in 2Q16?

Microsoft’s More Personal Computing segment continued its decline in 2Q16

In the prior part of the series, we discussed Microsoft’s (MSFT) recently announced fiscal 2Q16 performance. As expected, the company beat analysts’ expectations with its fiscal 2Q16 results. Let’s have a look at how its operating segments contributed to its 2Q16 performance.

Microsoft’s MPC (More Personal Computing) segment is responsible for approximately 50% of the company’s overall revenues. The segment’s revenues fell by 5% to $12.7 billion in fiscal 2Q16. In constant currency terms, this decline was 2%. Sluggishness in the PC market impacted this segment. Windows OEM Pro, which is a part of the MPC segment, derives its revenue from the business PC market. Windows OEM Pro revenue fell 13% on a YoY basis in 2Q16, as the below presentation shows.
How Did Microsoft&#8217;s Operating Segments Perform in 2Q16?

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PC shipments hit an eight-year low in 2015

In 4Q15, global PC shipments fell 8.3% on a YoY basis to 75.7 million units. For 2015, PC shipments stood at 288.7 million units, an 8% fall on a YoY basis. 2015 PC shipments hit their lowest level since 2007.

According to the IDC (International Data Corporation), global PC shipments stood at 71.9 million units in 4Q15, a fall of 10.6% on a YoY basis. 2015 was the first time since 2008 that global PC shipments fell below 300 million units.

Except for Apple (AAPL), all of the PC vendors including Lenovo (LNVGY), Hewlett-Packard (HPQ), Dell, Asus, and Acer experienced a fall in their market shares.

You can consider investing in the PowerShares QQQ Trust, Series 1 ETF (QQQ) to gain exposure to Microsoft. The company accounts for 8.4% of QQQ. Investors who would like application software exposure could also consider QQQ. Application software accounts for ~28.4% of QQQ.


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