Microsoft has announced its latest financials, and I have made a quick table summarising the year-on-year comparison for the quarter. See the end of this post for what the confusing segment categories represent.<\/p>\n
Quarter ending March 31st 2016 vs quarter ending March 31st 2015, $millions<\/em><\/p>\n A few observations.<\/p>\n Overall the figures are flat<\/strong>. That is not a bad result if you think of Microsoft as a PC company, considering that the PC is in decline; disappointing if you think of Microsoft as a cloud company. The answer is that one is offsetting the other, which is not too bad.<\/p>\n Microsoft says <\/strong>that revenue and income would be up, were it not for currency fluctuations. Of course there is that big hit in \u201cCorporate and other\u201d which is \u201cnet revenue deferral related to Windows 10 of $1.6 billion,\u201d according to the earnings statement.<\/p>\n On-premises server business is in retreat<\/strong>. It is not possible to migrate customers to the cloud while at the same time growing on-premises business. That truth finally showed up in Microsoft\u2019s figures. CFO Amy Hood referred to a \u201clarger than expected decline in our transactional on premise server business\u201d in the earnings call.<\/p>\n Margins are not so good in cloud<\/strong>. Selling software license is almost all profit, once you have developed it. Not so with cloud, which requires data centres, networking, and ongoing maintenance. \u201cOur company gross margin percentage declined this quarter driven by our accelerating mix of cloud services in our Intelligent Cloud and Productivity and Business Processes segment offset by higher gross margin percentage performance from products within More Personal Computing,\u201d said Hood.<\/p>\n Office 365 continues to grow<\/strong>. CEO Satya Nadella said that \u201cCommercial Office 365 customers surpassed 70 million monthly active users and we grew seats by 57 percent\u201d year on year. This is key to the company\u2019s health. Customers in Office 365 are hooked to the platform and more likely to buy other services such as Dynamics CRM, Enterprise Mobility Services MDM (Mobile Device Management), or applications hosted on Azure. \u201cDynamics CRM Online seats more than doubled this quarter with over 80 percent of our new CRM customers deploying in the cloud,\u201d said Nadella.<\/p>\n Windows 10 is being taken up<\/strong>. The nagware is working according to Nadella, who said that \u201cThe number of Windows 10 devices is twice that of Windows 7 over the same time period since launch.\u201d Nevertheless I still hear a lot of caution out there, with people advising one another to stick with Windows 7. Windows 10 pushes users more strongly to Microsoft services than 7, with Cortana driven by Bing. \u201cOver 35 percent of our search revenue last month came from Windows 10 devices,\u201d said Nadella.<\/p>\n Windows Phone is dying fast<\/strong>. \u201cFor phone we expect year over year revenue declines to deepen in Q4 as we work through our Lumia channel position,\u201d said Hood. <\/p>\n Linux is growing.<\/strong> Nadella made a few comments about SQL Server on Linux and Linux on Azure. Why SQL Server on Linux? \u201cWe look at that as an expansion opportunity,\u201d he said. Over 20% of VMs on Azure are Linux, he added. Microsoft made Linux \u201cfirst class\u201d on Azure in order to be able to host an enterprise\u2019s \u201centire data estate across Windows and Linux.\u201d People don\u2019t move between operating systems, he said, but \u201cnow they have a choice around database.\u201d<\/p>\n I\u2019d add that we are now seeing scenarios where Linux is ahead of Windows on Azure. The new Azure Container service<\/a> is currently Linux only, for example, though a Windows option is planned.<\/p>\n What Microsoft does with Linux in the coming years will be interesting to see. Office on Linux? Microsoft Android? <\/p>\n Productivity and Business Processes<\/strong>: Office, both commercial and consumer, including retail sales, volume licenses, Office 365, Exchange, SharePoint, Skype for Business, Skype consumer, OneDrive, Outlook.com. Microsoft Dynamics including Dynamics CRM, Dynamics ERP, both online and on-premises sales.<\/p>\n Intelligent Cloud<\/strong>: Server products not mentioned above, including Windows server, SQL Server, Visual Studio, System Center, as well as Microsoft Azure.<\/p>\n More Personal Computing<\/strong>: What a daft name, more than what? Still, this includes Windows in all its non-server forms, Windows Phone both hardware and licenses, Surface hardware, gaming including Xbox, Xbox Live, and search advertising.<\/p>\n","protected":false},"excerpt":{"rendered":" Microsoft has announced its latest financials, and I have made a quick table summarising the year-on-year comparison for the quarter. See the end of this post for what the confusing segment categories represent. Quarter ending March 31st 2016 vs quarter ending March 31st 2015, $millions Segment Revenue Change Operating income Change Productivity and Business Processes … Continue reading Microsoft Financials: steady, but a turning point as on-premises server business declines<\/span> \n\n
\n Segment<\/td>\n Revenue<\/td>\n Change<\/td>\n Operating income<\/td>\n Change<\/td>\n<\/tr>\n \n Productivity and Business Processes<\/td>\n 6522<\/td>\n +65<\/font><\/span><\/span><\/td>\n 2994<\/td>\n -210<\/font><\/span><\/span><\/td>\n<\/tr>\n \n Intelligent Cloud<\/td>\n 6096<\/td>\n +193<\/font><\/td>\n 2188<\/td>\n -345<\/font><\/td>\n<\/tr>\n \n More Personal Computing<\/td>\n 9458<\/td>\n +89<\/font><\/td>\n 1645<\/font><\/td>\n +596<\/font><\/td>\n<\/tr>\n \n Corporate and Other<\/td>\n -1545<\/font><\/td>\n -1545<\/font><\/td>\n -1544<\/font><\/span><\/td>\n -1352<\/font><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n A reminder of Microsoft\u2019s segments:<\/h3>\n