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4/25/2014
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Microsoft Earnings: 7 Essential Facts

Microsoft's Q3 beat expectations. Strong performers include cloud products and Xbox, but Surface and consumer PC sales still pose a problem.

Xbox Live revenue was up 17% in the quarter from a year ago. Bing now holds almost 19% of the US search market, and Microsoft reported that its overall search revenue was up 38%.

Microsoft added more than 1 million Office 365 Home users during the quarter, bringing total subscribers to more than 4.4 million. With the recent launch of the low-priced Office 365 Personal subscription option and Office iPad apps, this momentum could continue.

6. Nokia is still a question mark.
Microsoft's acquisition of Nokia's device business is scheduled to close on Friday. It will add 30,000 employees to the company's workforce. Microsoft's upbeat third-quarter results suggest its ongoing companywide reorg is progressing reasonably well. Integrating so many new workers could be a distraction.

Both Nadella and Hood acknowledged that investors are eager for more specifics about the Nokia deal, but neither detailed any concrete plans. Microsoft's Windows Phone 8.1 announcement earlier this month drew a lot of attention, but the company faces an uphill climb in the smartphone sector. IDC's 2014 projections give Windows Phone only about one-fourth Apple's market share and only one-twentieth Android's.

7. Analysts gave Nadella an early vote of approval.
Nadella didn't reveal a master plan for Nokia, but analysts and investors appear willing to give the new CEO some leeway. He inherited Microsoft's problem children, but he didn't conceive them, after all.

During prepared remarks, Nadella leaned on buzzwords from his earlier appearances, describing a world of "ubiquitous computing," in which current form factors join new wearable and Internet of Things siblings, and in which data is perpetually harvested for insights. Nadella's not the only CEO forwarding this vision of the future. But with Microsoft's cloud and datacenter products advancing, his plan is starting to look sharper.

During the Q&A, nearly every analyst ostentatiously thanked Nadella for joining the call -- something his predecessors in the job rarely did. Nadella repeatedly said he wants Microsoft to be accountable to investors, customers, and partners. "We want to build products people love to use," he stated, adding that he will focus on usage metrics as a key measure of success.

Emerging standards for hybrid clouds and converged datacenters promise to break vendors' proprietary hold. Also in the Lose The Lock-In issue of InformationWeek: The future datacenter will come in a neat package (free registration required).

Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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jgherbert
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jgherbert,
User Rank: Ninja
4/30/2014 | 12:08:55 AM
Re: renaissance
Yeah, I like that idea. 

 

Or, I suppose, if you want to build them, build them exclusively. e.g. Xbox is a hardware/software play. Nokia could be a hardware/software play if the combination is good enough (it worked for Apple, right?).

As for the desktop OS, I'll pass on the usual Windows 8 comments and just say that it's a tough market to be in, especially when your competition is Linux (free) and OS/X Mavericks (oh wait, also free). That's a tough sell for any business.
Drew Conry-Murray
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Drew Conry-Murray,
User Rank: Ninja
4/25/2014 | 12:49:03 PM
Re: renaissance
I think I'm with you. Microsoft should try to get on as many devices as possible, but it shouldn't be trying to build them.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
4/25/2014 | 11:57:57 AM
Re: renaissance
You can see from Nadella's decisions so far that he doesn't want to be in the hardware business. Yet the Nokia monkey sits firmly on his back. It's a bit alarming that they don't have any concrete plans about Nokia phone integration. But at least Nokia Windows Phones are in an explosive smartphone market, and have a chance as a solid No. 3. Surface, on the other hand, is is really up a creek. It hasn't been able to compete in the tablet market, and the tablet market itself is starting to cool.

Microsoft's way forward is through enterprise tools, cloud with Azure, Office 365, Lync, and spreading out Windows to new devices beyond PCs and tablets. And Nadella gets it.
petey
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petey,
User Rank: Strategist
4/25/2014 | 11:16:54 AM
renaissance
Microsoft has to figure out if it wants to be a software company or a hardware appliance company. Outside of gaming, which I would keep, I think they have a decent history of software innovation (devious/diabolical or not). Apple went hardware years ago and I think chasing them or Samsung is a lost cause. Play to your strengths. They have the expertise to make the cloud work and with the new office strategy, this could be the beginning of a renaissance.
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