I must admit… I was expecting more from the quarterly earnings report from Microsoft Corp. (NASDAQ:MSFT). Not so much from the earnings report itself… but in terms of the communication from Satya Nadella, the company's CEO.
The headlines speak to how badly the addition of Nokia (NYSE:NOK) impacted overall earnings. But, we knew that the Nokia acquisition was a dud… something that can easily be blamed on Steve Ballmer, Mr. Nadella's predecessor.
Mr. Nadella is trying to deal with that situation cutting employment in the Nokia… and Microsoft duplicate staff… by 12,500 people.
The Microsoft cloud computing effort rolls along. A 147 percent increase in revenues from this area was reported on Tuesday, which, annualized, is expected to contribute $4.4 billion in sales.
However, nothing more of substance was added to the vision Mr. Nadella has of the future Microsoft. Earlier "scuttle" had seemed to indicate that he would say more about where he saw Microsoft going.
Yes, Mr. Nadella said he was trying to narrow the company's efforts in mobile phones, the Xbox games console and the Bing search engine. He further promised to bring a more disciplined approach to his new strategy, ending work efforts that are nothing more than a duplication.
But, I feel strangely empty in terms of learning more about where Microsoft is going. We got that the Nadella Microsoft was going to be more mobile-first and cloud-first focused. But, we have seen little or nothing to provide us with a greater understanding of what this really means for the company.
Investors, so far, have given Mr. Nadella good marks for his performance. But, there are some analysts that are voicing some concern.
With respect to the general comments Mr. Nadella expressed in a memo last week, a 3,100 word memo that vaguely expressed a plan to rebuild Microsoft around a core of "productivity and platforms," some concern has been expressed. The comment of one analyst, Al Hilwa, of tech research firm IDC, has been reported in the Financial Times: "The strategy is mostly a continuation, but with refinement and adjustments."
The move to cut Microsoft jobs by 18,000 was a dramatic headline. But, more was…and is…expected.
A new CEO has only a limited amount of time to establish him- or her-self to the investment community. Mr. Nadella started off in good shape, particularly in comparison with the person he replaced.
Unfortunately, to me, Mr. Nadella and his vision still remained unarticulated… unless the analysts Al Hilwa… is correct.
Either Mr. Nadella is going to sharpen up his act… or, he will turn out to be a disappointment to most of us.
Microsoft will continue to post returns on shareholder's equity in excess of 15 percent (they just announced a return in excess of 26 percent), but, as we know, this return is based upon its historical platform and the market dominance it has in this area. A question about how Microsoft will use all of the retained earnings it is generating will still go unanswered…and we will be right back where we were before Mr. Nadella assumed the position of CEO.
So, what does this mobile-first and cloud-first company look like? We are still waiting for Mr. Nadella to give us the answer.
Disclosure: The author is long MSFT. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.