Microsoft's chief executive Satya Nadella said the company has no good devices in the smartphone market, but hopes the release of Windows 10 will change that.
Nadella acknowledged that Microsoft's position in the mobiles market needs improving in an earnings call following the company's latest quarterly results.
In reference to the Windows Phone division he said: "We're going to have great flagship phones for Windows 10. That's actually a segment we don't today have good devices, and we hope to change that with Windows 10."
Nadella touted the importance for Microsoft to have strong mobile devices, particularly in the business sector, to support the work its doing with other hardware to create an ecosystem around Windows 10 which is due for release on 29 July.
Microsoft will no doubt be looking to improve its mobile phone division after it posted the largest ever loss in its latest quarterly results, having incurred $8.4bn in charges relating to the restructuring of the Nokia mobile business.
Microsoft's 2015 fourth-quarter financial results showed revenue of $22bn, a five percent decrease on the same quarter last year, and a profit of £4.6bn.
Weaker demand for Windows licences after the discontinuation of Windows XP and the imminent release of Windows 10, resulted in an eight percent drop in revenue from licences.
Revenue from versions of Windows bundled with PCs tumbled by 22 percent, which Microsoft attributed to the end of Windows XP support.
Further losses are attributed to the Windows Phone division seeing a thumping 68 percent revenue decline of $552m, which Microsoft linked to the conclusion of its deal with Nokia and a fall in royalty revenue.
The figures translate into a loss of 40c per share, in contrast to a net income of 55c per share a year earlier.
The quarter ended off Microsoft's full financial year for 2015, showing revenue of $93.5bn and a profit of $12.2bn. Microsoft earned $1.48 per share based on yearly revenue.
However, while revenues grew by $6.7bn in 2015, Microsoft's profits were effectively halved from the $22bn in 2014. Earnings per share also fell from the $2.63 reported at the end of the company's previous fiscal year.
Microsoft's share price fell by four percent in after-hours trading, driven by the losses despite a generally positive reaction among analysts.
A report on Bloomberg said that, if the restructuring costs were discounted for the quarter, analysts on average predicted profits of 58c per share based on $22bn in revenue.
With Microsoft reporting earnings of 62c per share, adjusted to leave out the $8.4bn charges, it would appear that the company surpassed expectations.
Chief executive Satya Nadella claimed that the company's investments in its wide product and service portfolio are paying off.
"Our approach to investing in areas where we have differentiation and opportunity is paying off, with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits. And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem," he said.
Cloud and hardware happy
Microsoft's commercial cloud products appear to be in rude health, and the firm reported that Azure, Office 365 and Dynamics CRN Online drove cloud revenue up by 88 percent.
Microsoft added three million Office 365 subscribers during the quarter, taking the total number of paying users to 15 million.
The computer and gaming hardware divisions saw 44 percent growth in the quarter, generating combined revenues of $1.9bn.
The performance of the Surface Pro 3 and Surface 3 saw Microsoft's surface hardware arm grow by 117 percent, drawing in $888m for the company.
Microsoft also claimed success with Bing search and advertising, which grew by 21 percent, while Microsoft's Xbox division grew by 27 percent.
Interestingly, Microsoft's spending on research and development for the fiscal year was up from $11.3bn to $12bn, hinting at the development of products such as HoloLens and the Cortana virtual assistant over the past 12 months.
The financial results suggest that Microsoft is focusing on cloud and productivity products, having recently added Apache Spark support to Azure to aid big data analytics.
This indicates that Microsoft is pushing ahead with its cloud and data analysis empowerment ethos outlined by Nadella.
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