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Microsoft roundup: Nadella, Bing/Yahoo, Capptain

  • Asked whether he supported Microsoft's (MSFT -0.4%) oft-criticized $7.2B acquisition of Nokia's phone unit when it was first struck, Satya Nadella declined to answer during a Code Conference talk (live blog).
  • Bloomberg previously reported Nadella and Bill Gates (among others) voiced objections to the deal, and that Steve Ballmer was its driving force.
  • Nadella declared Microsoft has no plans to sell Bing, which has generated huge losses over much of its history, to partner Yahoo (YHOO -0.7%). Marissa Mayer has expressed dissatisfaction over the performance of the Bing/Yahoo partnership (set to last until 2020), and has reportedly launched search tech projects meant to lower Yahoo's Bing dependence.
  • Nadella also: 1) Asserted he has "no intent to do anything different on Xbox" than what Microsoft's doing today. 2) Stated Gates, who recently promised to spend over 1/3 of his available time at Microsoft, has "got some specific interest in Office and how to reinvent it."
  • Separately, Microsoft is acquiring Capptain, a developer of analytics/usage-monitoring tools for app developers. Microsoft says it will integrate Capptain's offerings with its Azure cloud app platform (PaaS) services. The company has already rolled out a slew of new Azure tools this year.
Comments (9)
  • Transcripts&10-K's
    , contributor
    Comments (767) | Send Message
     
    "Nadella declared Microsoft has no plans to sell Bing, which has generated huge losses over much of its history, to partner Yahoo."

     

    Bing has also doubled it's share in the last five years (gained more than ten percentage points since June 2009) and is approaching 20% of the market in the US (+1.4 points in the past year), but I guess that's not worth mentioning. The same can be said for Microsoft's 38% search advertising revenue growth in the most recent quarter.

     

    When will the endless cries for Microsoft to sell Bing finally end? Asked differently, when will these people finally understand that Bing is core to Microsoft's future (in WP, Windows, Office integration, etc)?

     

    Maybe now that Bill Gates has said selling Bing "makes no sense" and that Satya has echoed that sentiment, these people will finally stop - but I doubt it...
    28 May, 02:42 PM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (857) | Send Message
     
    "Bing has also doubled it's share in the last five years (gained more than ten percentage points since June 2009) and is approaching 20% of the market in the US (+1.4 points in the past year), but I guess that's not worth mentioning. "

     

    If those numbers were mentioned, it would also have to be mentioned that Bing isn't doing half as well internationally. Bing/Yahoo have just a 6.9% global search share, per StatCounter.

     

    http://bit.ly/1kgIsGn

     

    On mobile, the situation is even worse thanks to Google's Android/iOS integration. Just a 5.3% combined share (1.76% for Bing proper).

     

    http://bit.ly/1kgIvSu

     

    There are side benefits to owning Bing, such as Windows search and Cortana integration. And as a consumer, I'm glad that Google has some competition. But on a standalone basis, the business has been a cash sinkhole for Microsoft. Competing against Google's mindshare, R&D budget, user data, and advertising network effects is bound to be a giant uphill battle for anyone.
    28 May, 02:58 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (767) | Send Message
     
    "But on a standalone basis, the business has been a cash sinkhole for Microsoft."

     

    That's certainty true - they needed to invest in the product and build scale to effectively compete; doubling their US search share in the past five years (the region they've been primarily focused on) and continuing to build share, while closing the gap in terms of product quality, has taken them a long way towards that goal; is that worth any consideration?

     

    "Competing against Google's mindshare, R&D budget, user data, and advertising network effects is bound to be a giant uphill battle for anyone."

     

    Very true - and in that scenario, Microsoft has doubled their search share in the past five years in the US, and continues to take share; they've been winning that uphill battle, slowly but surely, with no signs of slowing down (as I noted above, 38% search advertising revenue growth in the most recent quarter).
    28 May, 04:28 PM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4267) | Send Message
     
    Microsoft would do well to sell off all their consumer products and concentrate only on enterprise and OEM products. Upper management at (MSFT) has been abysmal at consumer products. Let a new management team concentrate on meeting the needs and desires of consumers. Maybe then they'll get a few things right.
    28 May, 04:29 PM Reply Like
  • TimmiesRegular
    , contributor
    Comments (1175) | Send Message
     
    @David - pretty sure that MS owns the enterprise because it focused on the home market and people brought that thinking to work. Unix used to be the workplace norm.

     

    MS has grown up from DOS to the enterprise. MS still has 90% of the desktop share which is under attack but still huge.

     

    I do agree that some of their latest offerings aren't great but MS was never about hardware. It will take more than a few tries to get this right.

     

    And I don't own MSFT, but I don't think their products are that bad.
    28 May, 04:50 PM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (857) | Send Message
     
    "they needed to invest in the product and build scale to effectively compete;"

     

    The unit has produced at least several billion in op. losses in recent years, and from the looks of things (hard to tell with the new reporting) is still losing money. If/when it turns profitable, it'll need to make sizable profits to compensate.

     

    And mobile is a clear headwind at this point, even if one just focuses on market share and not monetization. My guess is it'll remain so unless Windows Phone significantly grows its smartphone share and/or Microsoft convinces Apple to abandon Google as the default iOS/Mobile Safari search option. The latter is doubtful following the Apple Maps fiasco.

     

    Wouldn't surprise me if Nadella decides to pare Bing's opex. There are strategic benefits to keeping the unit (agree with you there), but a company can only justify "investing for the future" for so long when you're dealing with a relatively mature market.
    28 May, 10:56 PM Reply Like
  • wil3714
    , contributor
    Comments (1957) | Send Message
     
    Why do you need earnings when your company is already so cheap and $90B in cash. I;d rather grow the business vs let cash sit
    29 May, 02:41 AM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (767) | Send Message
     
    "There are strategic benefits to keeping the unit (agree with you there), but a company can only justify "investing for the future" for so long when you're dealing with a relatively mature market."

     

    If you can double your share position (off a sizable base) in a five year period, even mature markets can report solid growth - that's how they put up a +38% in the most recent quarter. Especially when considering the uphill battle that you mentioned above, these results are outstanding; the real issue is that Microsoft is still paying for waiting way too long to get serious about search - that cost them billions to recover from.

     

    Your points on Apple are valid - Google spends a lot of money to buy the default search option. I think Apple will continue to move away from Google, with the Siri change in iOS 7 only the beginning - time will tell.
    29 May, 09:28 AM Reply Like
  • fearless195
    , contributor
    Comments (106) | Send Message
     
    I think the Bing algorithms will, as Satya pointed out, continue to be important ingredients under the hood of Office365. Corporate Cloud, geolocation and proximity-based associative search will be huge assets for this model moving forward - the search engine used by your PC's browser hardly matters anymore. Bing is not really something you can sell, when there are other perfectly fine search tools out there. It's its value within that MSFT will leverage.

     

    Hope the Surface 3 wins its share, but in the end Office for iPad is just fine too and I wouldn't want to get too upset if it's just a niche product. Larger fish to fry.
    29 May, 01:43 AM Reply Like
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