An updated guide to deciphering Microsoft's financials

Microsoft's fourth quarter 2014 earnings will be the first to factor in impact from the Nokia devices and services business Microsoft acquired in April. Here's how the company's reporting structure will change as a result.
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft announced a new financial reporting structure a year ago, timed with its July 2013 company-wide reorg.

The five reporting segments outlined at that time included three in Devices and Consumer (D&C) -- D&C hardware, D&C licensing and D&C other -- and two in Commercial -- Commercial licensing and commercial other.

As of its July 22 earnings report for its fourth quarter in fiscal 2014, Microsoft will report the financial performance of Nokia in a new segment called Phone Hardware, which will be part of the Devices and Consumer (D&C) segment. And the current D&C hardware segment will be renamed to Computing and Gaming Hardware.

After this change, the D&C Hardware reporting segement will includes: D&C licensing; Computing and Gaming hardware; Phone hardware; D&C other Hardware. Prior to today, the D&C hardware segment included Surface; Xbox and Xbox Live subscriptions and "other" hardware.

Microsoft officials provided some general guidance on the changes to the reporting categories during the company's Q3 2014 earnings call in April. At that time, officials said:

"Under the existing commercial agreement between Microsoft and Nokia, license sales and platform payments are reported in the D&C Licensing segment. Once the acquisition closes, results for Nokia Devices and Services will be reported in the D&C Hardware segment. For Q4, we will clearly show the impact of the ending of the commercial agreement, Nokia’s ongoing operations and any one-time integration and severance costs. And we remain committed to achieving annual cost synergy targets of at least $600 million within 18 months of close."

One of the ways Microsoft is counting on achieving cost synergy targets is via layoffs of 12,500 Nokia staffers, we know as of last week. Microsoft also announced plans to discontinue the Android-based Nokia X phones and the Asha and S40 feature-phone lines from Nokia.

Microsoft took possession of Nokia's devices and services business on April 25, 2014. 

Editorial standards