Posts Tagged ‘ Mobile Apps ’


The company suffers in comparison to the same period last year, but sales of tablets and Windows help it beat expectations

Microsoft’s profit dropped and its revenue was almost flat in its third fiscal quarter, during which the company replaced Steve Ballmer with Satya Nadella as CEO.

Revenue came in at US$20.40 billion, down slightly from $20.49 billion in the same quarter last year. Net income was $5.7 billion, or $0.68 per share, down from $6.1 billion, or $0.72 per share.

However, Microsoft’s revenue matched the forecast of analysts polled by Thomson Reuters and exceeded their earnings-per-share estimate by $0.05. Sales growth for tablets and Windows helped Microsoft’s results.

On a pro forma basis, which excludes certain one-time items, revenue increased 8 percent and earnings per share rose 5 percent.

“I sum up this quarter in two words: execution and transition,” Nadella said on a conference call to discuss the results. “We delivered solid financial results and we took several steps to reorient Microsoft.”

Nadella was appointed CEO in early February, before the quarter was halfway through, and sounded upbeat on his first earnings call since taking over.

He said the results reflect Microsoft’s strengths and opportunities in a “mobile-first, cloud-first world,” a phrase he has used constantly since becoming CEO.

Keeping the staff and products focused on that idea is one of his priorities, he said on Thursday.

Asked on the call if any significant strategy changes are in the works, Nadella didn’t mention any particular area but said his philosophy is to have the company on a continuous cycle of planning and execution, and to revise plans as frequently as needed based on the market.

“We’ve picked up the pace on asking the hard questions,” he said.

Nadella said he was particularly satisfied with the adoption of Microsoft cloud services, which he considers key for the company’s long-term outlook.

He cited recent moves to boost the Office and Windows franchises, such as the launch of Office for the iPad, the update to Windows 8.1, the upcoming Windows Phone 8.1 upgrade and the decision to license Windows for free to hardware vendors making smartphones and tablets with screens smaller than 9 inches.

The shift from PCs to mobile creates opportunities for Windows and Office, according to Nadella, but requires a different approach to licensing, pricing and technology.

“We are committed to ensuring that our cloud services are available across all device platforms that people use. We are delivering a cloud for everyone on every device,” he said.

The Devices and Consumer division’s revenue grew by 12 percent to $8.30 billion, while gross margin fell 1 percent to $4.71 billion. Some highlights were a 4 percent revenue increase in Windows OS sales to hardware vendors, and a 50 percent increase in Surface tablet revenue, to $500 million.

Windows sales to hardware vendors weren’t uniform. The regular consumer version of Windows saw revenue drop 15 percent, while Windows Pro, which ships with business PCs, posted a 19 percent gain. Microsoft attributed that growth to strong sales in developed markets and in enterprises, and higher penetration in small and midsized businesses.

Microsoft also highlighted that Office 365 Home, the subscription-based version of Office for consumers, ended the quarter with 4.4 million subscribers, almost 1 million more than in the previous quarter, and that Bing’s search ad revenue went up 38 percent.

Despite that spike in search ads, total online ad revenue was up only 16 percent, crimped by a 24 percent drop in display ad sales.

Revenue for the traditional Office suite, sold via perpetual licenses, rose 15 percent, thanks primarily to sales in Japan. Combined with Office 365 Home sales, revenue for those consumer-focused versions of Office increased 28 percent. Microsoft cited the April 8 end-of-support deadline for Windows XP for spurring sales of Windows and Office.

The Hardware segment of the Devices and Consumer division had revenue growth of 41 percent, reaching $1.97 billion and driven by Xbox and Surface. Microsoft sold 2 million Xboxes during the quarter, and the Xbox business had revenue growth of 45 percent.

The Commercial division’s revenue rose on a pro forma basis by 7 percent to $12.23 billion, and gross margin rose 6 percent to $9.91 billion. The division’s performance was helped by a more-than-100-percent revenue increase from Office 365, the cloud and subscription suite of server and desktop productivity applications for businesses, and by a 150 percent hike in revenue from the Azure cloud platform services. Overall, the Commercial division’s cloud revenue more than doubled.

Other highlights from the Commercial division include an 11 percent revenue increase in Windows volume licensing for business customers and “double-digit” revenue growth for on premises collaboration and communication server products Lync, SharePoint and Exchange, as well as for the SQL Server database and Windows Server OS. Taken together, on-premises server products had a revenue increase of 10 percent. Revenue from traditionally licensed Office was up 6 percent.

Microsoft estimates that about 90 percent of enterprise desktop PCs worldwide now run either Windows 7 or Windows 8.

Overall gross margin rose 3 percent during the quarter to $14.5 billion, while operating expense grew 2 percent to $7.5 billion. Microsoft expects to include in its next quarterly report the impact of its $7.2 billion acquisition of Nokia’s devices business.


 

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Microsoft created a virtual assistant, made Windows free on small devices, and brought back the Start button – but it’s still playing catch-up

This has been a big week for Microsoft, with a flood of new announcements and changes of direction. Along with its Build conference, new CEO Satya Nadella has made a number of moves designed to reverse the public perception that the company is an aging also ran in the technology races.

The changes include
Rolling out its new Cortana digital voice assistant
Announcing that Windows would be free to manufacturers of devices with small screens
Coming out with “universal” Windows technology that helps developers build apps that run on multiple versions of Microsoft’s operating system
Reviving the popular “Start” menu for Windows 8.1

Though some of those moves are more important than others, they’re all good things. Unfortunately, I don’t think they’ll be enough to solve Microsoft’s problem of being seen as your father’s technology vendor. Here’s why:

Consumers vs. IT
As noted above, Microsoft’s issues right now revolve around how the company is perceived by consumers, and it’s unlikely that these initiatives will be enough to change those perceptions. While all useful, none of them are truly new. Instead, they’re playing catch-up to existing products and services from Microsoft’s competitors, perhaps with incremental improvements, or acknowledgements that previous Microsoft strategies simply weren’t working out.

Technology professionals will welcome these changes, but the IT community isn’t where Microsoft’s problems lie. In my experience,, enterprise IT generally likes and trusts the company. Microsoft’s challenges lie in convincing fickle consumers that it’s as cool and innovative as Apple and Google. I can’t imagine these moves being exciting enough to do that.

Better, but not better enough
While initial reports suggest that Cortana is a credible or even superior alternative to Apple’s Siri and Google Now, the fact remains that other companies pioneered the voice assistant idea. Cortana would have to be light-years better than its already-in-place rivals to truly give Microsoft a significant advantage.

Similarly, making Windows free for mobile devices may help spark more device makers to adopt the platform, but it’s not like it will make an immediate difference to consumers. Besides, Android is already free to license. Once again, Microsoft is playing catch up.

Universal Windows app development may pay off with more app choices in the long run, but it’s a pretty geeky concept for most end users. Finally, bringing back the Start menu will ease the transition to Windows 8 for some holdouts, but let’s face it, the cool kids aren’t really interested in desktop Windows at this point.

Put it all together and you’ve got a collection of tweaks and that could change the substance of what Microsoft does, but won’t dent the way most people think of the company.

More, please!
Still, there’s a big ray of hope here. The fact that Microsoft was willing and able to make these changes could signal that more are on the way. If Microsoft can keep shaking things up and continue to show that things really are different now, eventually people will begin to notice and perhaps change their minds about the company. And then it truly won’t be your father’s Microsoft any more.


 

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Apple and Microsoft must have missed sniping at each other, because this is petty.

It’s been a while since Apple and Microsoft took cheap shots at each other. I guess they got bored. One news outlet reports Apple is being difficult about approving the newest version of SkyDrive for iOS.

The Next Web reports that the two are at loggerheads over a new version of SkyDrive, which has a paid storage option because Microsoft doesn’t pay Apple a 30% cut of subscription revenue generated by paid storage services.

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A main sticking point is that Microsoft does not want to pay Apple the 30% cut, which runs in perpetuity regardless of whether users continue to use an iOS device or not, because the billing is done through their Apple account.

So if a user signed up for the enhanced-capacity drive on their iOS device and then moved to a non-iOS phone (say, a Windows Phone), Apple would still collect 30% of their fee for storage even though they aren’t using the iOS device any more. Microsoft is understandably not keen on this.

The problem is not limited to just SkyDrive. AllThingsD reports that this fee is also applied to Office 365 subscriptions sold through Microsoft Office for iOS, which Microsoft has all but acknowledged will be launched sometime next year.

A spokesperson for Microsoft responded to a query with this comment:

“Similar to the experiences of some other companies, we are experiencing a delay in approval of our updated SkyDrive for iOS. We are in contact with Apple regarding the matter and hope to come to a resolution. We will provide additional information as it becomes available.”

Apple, as usual, isn’t talking.

This problem could easily spread to other apps. Third-party developers that use SkyDrive would also be hit with the 30% fee, and they aren’t going to like that perpetual fee, either.

How this plays out will be very interesting. Microsoft could practice what it preaches and offer policies for the Windows Store similar to what it wants from Apple. This would be a key point of differentiation and potentially competitive.

If Apple continues to play hardball and extends the same courtesy to DropBox and other cloud storage apps, Apple could be the one shut out and shunned. Will it happen? Who knows? Tim Cook does not strike me as unreasonable, and now that this is out and in the media, the pressure may come down on Apple.

Now the real test for Microsoft will be how it behaves when the shoe is on the other foot.


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