Microsoft's weak phone sales drag down its Surface and cloud wins

Microsoft's acquisition of Nokia is proving to be quite the albatross. The company has stepped away from focusing on phones, and its handset sales revenue fell by almost half in the first quarter.

Microsoft sold only 2.3 million Lumia phones during the quarter, 73 percent fewer units compared with the first quarter of 2015. That meant Lumia handset revenue fell 46 percent; this dragged down the company's overall device revenue despite major gains in its Surface business. 

Sales of Surface tablets and the Surface Book touchscreen laptop brought in $1.1 billion for Microsoft during the last quarter, compared with $713 million during the same period last year. That's good news for the company's future, but it's being hurt by the present state of the phone business.

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