Microsoft today announced their Q1 FY15 financial results and the results were mostly positive expcept that of Devices and Consumer Licensing division. Revenue of Windows, Office 365 and Windows Phone were down last quarter. The lower Windows licensing revenue is in line with the slowing PC market, decrease in Office revenue as Microsoft is transitioning customers to Office 365 subscription model and Windows Phone revenue is down due to less IP royalites from low-end devices.
D&C Licensing revenue decreased $391 million or 9%, due mainly to a $176 million decline in Windows Phone revenue, as well as lower revenue from licenses of Windows and Office Consumer. Windows Phone revenue decreased, primarily due to lower per unit royalties based upon the mix of devices sold by our licensees. Windows OEM revenue declined 2%, primarily due to declines of 4% in OEM Pro revenue and 1% in OEM non-Pro revenue, consistent with dynamics in the commercial and consumer PC markets. Office Consumer revenue declined 5%, reflecting the transition of customers to Office 365 Consumer.
D&C Licensing gross margin decreased $102 million or 3%, primarily due to the decline in revenue, offset in part by a $289 million or 51% decrease in cost of revenue. D&C Licensing cost of revenue decreased, due mainly to a $239 million or 61% decline in traffic acquisition costs, primarily because our joint strategic initiatives with Nokia ended in conjunction with the acquisition of NDS.