3. Windows Revenue Doesn't Tell The Whole Story.
Even though Windows revenue is likely to be down, the decline won't necessarily constitute a referendum on Windows 8's success or failure. In an emailed statement, Forrester analyst Chris Voce noted that a substantial portion of Windows revenue comes from Microsoft's Software Assurance program, which grants a company the right to deploy any new versions of software as long as the program is active. "Whether or not a company deploys Windows 7 or 8 is irrelevant" because the company ends up paying Microsoft either way, he said. As a result, if companies decide to skip a version of Windows, the revenue impact is somewhat diminished. Voce noted that companies will pay the same Software Assurance costs whether they stick with Windows 7 for the next few years or elect to upgrade. "Microsoft books that revenue every quarter," he noted.
4. What Is Office 365's Future?
Office 365 is winning fans in both large institutions and the enterprise, where it has provided better collaboration, more flexible budgeting, and increased worker productivity. But despite these pockets of success, the product line still faces resistance. Many users, consumers and businesspeople alike, find aging versions of Office to be acceptable, and it's not clear if any of the newer features -- cloud synching, integrated Bing apps, social media hooks, etc. -- will actually compel upgrades. There also might have been fallout related to Microsoft's initially inflexible Office 2013 licensing policies. Some customers took umbrage that the standalone licenses were unattractively priced, a tactic ostensibly intended to push customers toward the subscription-based Office 365. Microsoft has since revised its user agreements to address this criticism.
According to Gartner analyst Kleynhans, if Microsoft reports that it has moved a substantial number of organizations to Office 365, "that will be a really good sign for the future." If Office revenue underwhelms, however, it could be a sign that Redmond's flagship productivity products -- the legacy apps to end all legacy apps -- could be oversaturated. Much like the people who opted not to buy new PCs because their current models are "good enough," many customers might feel that Office's recent improvements aren't worth the effort and cost.
In an email, Forrester analyst David Johnson brought up another risk: Google Apps, QuickOfficeHD, and Apple's iWork are making progress on non-Windows tablets. Microsoft appears to be withholding an iOS or Android version of Office in order to let Windows RT models find their footing, with recent rumors suggesting these cross-platform versions of Word, Excel et al will not launch until late 2014. The value of Windows RT has been hotly debated, with some analysts saying the lightweight OS should be abandoned so Microsoft can focus on its more robust sibling. Thursday's earnings won't settle this matter, but they could provide more insight into Redmond's decision-making.
5. What About Windows Blue?
Details about Windows 8.1, allegedly the official name for Windows Blue, might wait until June, when a public preview is alleged to be available, and when Microsoft will be putting on a show at its aforementioned conferences. Still, outgoing Intel CEO Paul Otellini let slip that $200 Windows 8 tablets are on the horizon, a statement that squares with previous rumors that Microsoft is focused on not only expanding its mobile presence but also competing in the 7-inch tablet market currently dominated by Apple and Samsung. Microsoft has declined to confirm that rumor.
Windows Blue could hold great potential: a unified Microsoft ecosystem could allow both internal and external developers to be more nimble; alleged new features could permit users to seamlessly carry online experiences from device to device; the desktop and Modern UIs could be more harmoniously integrated. Then again, the update could be a series of incremental improvements that enhance usability but do little to sway the unconverted. Microsoft faces considerable uncertainty regarding how it will maintain its huge base of legacy business users while also aggressively pursuing the increasingly important consumer market. Microsoft is unlikely to go into detail about all this, but it could reassure shareholders by at least filling in some of the broad strokes of its vision.
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