Thu, Feb. 26, 2:25 PM
- The Nikkei and Chinese media report Microsoft (MSFT -0.1%) plans to cut 9K jobs at two Chinese phone manufacturing plants that originally belonged to Nokia. A local Microsoft exec is quoted as saying the plants will be shuttered by the end of March, with production capacity transferred to Vietnam.
- Microsoft announced last July it's cutting 12.5K phone division jobs, and 18K within the company overall. The software giant is in the midst of significantly paring back the division's declining feature phone ops; it sold 39.7M non-Lumia phones in the December quarter to go with 10.5M Lumias.
- The job cuts come as Microsoft continues dealing with a Chinese antitrust probe, and a far-reaching effort by China to lower its dependence on foreign tech suppliers. The company laid off its Chinese Xbox R&D team last fall.
Fri, Feb. 20, 7:31 PM
- Though more complex to run that standard public cloud solutions, hybrid clouds are "likely to grow as a percentage of total cloud deployments in the next two to three years" due to strong corporate interest, argues Pac Crest's Brendan Barnicle. He expects Microsoft (NASDAQ:MSFT), which has made an aggressive hybrid cloud push via Azure and its integrations with various on-premise Microsoft products, to benefit.
- While Amazon and Google overwhelmingly focus on public cloud services, Barnicle observes many enterprises are more partial to a hybrid approach in which mission-critical apps and data are kept on-premise, while other workloads are moved to public clouds. He also points out hybrid clouds enable new backup, disaster recovery, and archiving services, among others.
- In addition, Barnicle argues a server upgrade cycle resulting from Microsoft's ending of Windows Server 2003 support (set for July 14) will boost Azure demand. "We believe many of these customers will be upgrading to Windows Server 2012 R2, which would allow hybrid cloud deployments. Additionally, most of the SMB customers that need to upgrade are likely to transition to a public cloud solution such as Azure."
- Rackspace, IBM, and other backers of the OpenStack cloud infrastructure platform are also betting heavily on hybrid clouds. Meanwhile, Google struck a deal last month with VMware to make several Google public cloud services available on VMware's vCloud Air hybrid cloud platform.
- Microsoft hasn't broken out Azure's revenue by itself. The company did recently announce its Commercial Cloud revenue (covers Azure, Office 365 for businesses, and other offerings) is now on a $5.5B/year run rate.
Wed, Feb. 18, 12:15 PM
- Down AH yesterday due to the light sales guidance provided with its mixed Q4 results, Rackspace (RAX +1.4%) is now back above $50. Helping its cause: Pac Crest has upgraded to Outperform, and at least four firms have hiked their targets.
- Pac Crest cites enterprise and OpenStack momentum as reasons for upgrading: "In the second half of 2014, Rackspace won more large enterprise contracts worth at least $100,000 per month than it had in the prior five quarters combined ... management indicated that OpenStack now makes up more than 50% of its public cloud revenue, which implies OpenStack revenue is at least 15.6% of its total revenue."
- Cowen (target hiked to $75) now considers it likely Rackspace "will announce support for a mega cloud provider in 1H15," thereby boosting its long-term addressable market and lowering future capex needs (in exchange for sharing revenue). It adds sales guidance was in-line after adjusting for forex, and that EBITDA margin guidance was better than expected.
- Meanwhile, new CEO Taylor Rhodes argues the cloud infrastructure (IaaS) market's price war is calming down. "Amazon Web Services (NASDAQ:AMZN) in November, for the first time, didn’t make a price cut move ... AWS is feeling like they are the reference brand leader, that they are strong versus Google (NASDAQ:GOOG), so they don’t need to do it as much. Microsoft (NASDAQ:MSFT) is cutting price, but who knows how much share they are actually taking."
- He also reiterates Rackspace's assertion that its OpenStack/hybrid cloud offerings are differentiated in the battle for enterprise accounts. "The mainstream market has two problems: They have legacy apps that won’t go [to multi-tenant public clouds] automatically ... the second problem they have is this skills set gap ... There is a need for software and tools development."
- Q4 results, guidance/details
Tue, Feb. 17, 10:30 AM
- 7 of the 8 firms launching coverage on Box (BOX -2.6%) following the end of its underwriter quiet period have provided neutral writing, generally citing valuation as their reason for doing so.
- Though launching coverage at Neutral due to the company's multiples, JPMorgan praises "Box's differentiated focus on rich and complex features for corporate IT departments, spanning security, compliance, workflow and auditing."
- Morgan Stanley (Equal-Weight) predicts "a growing enterprise ecosystem will offset competitive pressures over time," but also considers a current enterprise value of 7x 2016E sales fair in light of "near-term limits on growth and margins."
- Credit Suisse (Outperform) is the sole firm to give Box a bullish rating, arguing the company offer a better enterprise file-syncing/sharing platform than top rival Microsoft, and that it "has sufficient lead time to further improve its competitive position and expand its user base."
- Speaking of Microsoft (NASDAQ:MSFT), Box has announced it's joining Citrix and Salesforce as initial members of the software giant's Cloud Storage Partner Program. The deal allows Box's services to be integrated with the Office iOS apps, and more deeply connected to Office Online. Box/Office 365 integration already exists, as does a partnership between Microsoft and Dropbox.
- Previously: Box CEO makes long-term case
Thu, Feb. 12, 1:11 PM
- Israel's Globes and Calcalist report Microsoft (MSFT +1%) is acquiring N-trig, a local developer of digital styluses and stylus/touch controller chips. Both suggest the deal price is around $200M.
- With N-trig's technology powering Surface tablet styluses, Microsoft already accounts for 79% of the company's revenue. N-trig has raised $130M via 8 funding rounds, but had less than $5M in cash left as of June 2014. Plans for a Tel Aviv IPO were cancelled last year.
- A common sight on pre-iPhone smartphones, styluses are now most notably used with Surface tablets and (courtesy of Samsung's proprietary S-Pen) Samsung's Galaxy Note line. However, there are also plenty of 3rd-party stylus accessories available for the iPad and Android tablets, and rumors that Apple will offer a stylus for an upcoming 12.9" iPad aimed at business users and creative professionals.
- Separately, Microsoft has confirmed its acquisition of calendar app maker Sunrise; TechCrunch reported last week the deal features a $100M+ price.
- Other recent acquisitions: Revolution Analytics, Equivio, HockeyApp
Tue, Feb. 10, 10:08 AM
- Six months after filing a contract dispute suit with Samsung (OTC:SSNLF) over unpaid Android royalties, Microsoft (MSFT -0.2%) says it has settled the dispute. Terms are confidential.
- Microsoft previously suggested Samsung stopped paying royalties in late 2013, with the electronics giant arguing the Nokia deal (by making Microsoft a phone manufacturer itself) nullifies the 2011 Microsoft/Samsung deal and requires a new cross-licensing agreement to be inked.
- The bottom-line impact of a settlement could be big: Samsung paid $1B in royalties to Microsoft in 2013 (pure gross profit, or close to it), and Samsung, though losing ground in recent quarters, still maintained a 20% Q4 global smartphone share, per IDC.
- Microsoft's total "Windows Phone" licensing revenue (includes Android royalties) amounted to $2.54B in FY14 (ended June '14). Nokia licensing payments (no longer being made) accounted for $382M of the figure.
Mon, Feb. 9, 1:57 PM
- Shortly after Reuters reported Microsoft (MSFT +0.1%) is expected to raise $7B through a debt offering (and has seen over $26B in orders), Bloomberg reports the offering has been upsized by $3.75B thanks to strong demand.
- The reported offering size would make the debt sale Microsoft's largest ever, and serve to increase its total debt load to ~$39B. The company's buyback pace might soon accelerate sharply from the December quarter's $2.1B.
Mon, Feb. 9, 11:26 AM
- With the company having recently promised to use up the $31B remaining on its $40B buyback authorization by the end of 2016, Microsoft (MSFT +0.4%) is tapping debt markets again, offering both floating-rate notes and multiple tranches of fixed-rate notes.
- The prospectus doesn't provide an offering size or maturity dates, but Reuters reports $7B worth of debt is expected to be sold, over $26B in orders have been taken in, and that maturities range from 5 to 40 years.
- Not surprisingly, Moody's has granted the debt an Aaa (Prime) rating. Also unsurprising are the low reported interest rates: 5-year, 10-year, and 30-year debt tranches are said to respectively carry interest rates just 55 bps, 95 bps, and 140-145 bps above comparable Treasurys.
- Microsoft sold $8B in dollar and euro-denominated notes in late 2013. The company had $103B in cash/investments (much of it offshore) at the end of December, and $28B in debt.
- Update (2:25PM): Bloomberg reports the offering has been upsized to $10.75B.
Wed, Feb. 4, 2:53 PM
- TechCrunch reports Microsoft (MSFT +0.9%) has acquired Sunrise, a developer of mobile (iOS/Android) and cloud-based calendar apps, for a price of "at least $100 million."
- Sunrise's apps respectively have ratings of 4.5/5 and 4.3/5 stars on the App Store and Google Play; Google Play reports seeing 500K-1M installs. The apps sync/integrate with Microsoft Exchange, Google Calendar, Eventbrite, and iCloud. TechCrunch reports hearing the apps will remain available on a standalone basis.
- The report comes two months after Microsoft, which has done much to boost its cross-platform credentials in the Satya Nadella era, bought iOS/Android e-mail app developer Acompli for a reported $200M+. Acompli's app underpins new Outlook mobile apps launched by the software giant.
- Two weeks ago: Microsoft shows off HoloLens, new browser, universal apps
Wed, Jan. 28, 2:46 PM
- WorkMail, an Amazon (AMZN -0.1%) corporate e-mail/calendar solution launching in Q2, takes aim at a market dominated by Microsoft (NASDAQ:MSFT), and in which Google (Gmail/Google Calendar) and IBM (Notes/Domino) are also prominent.
- Amazon isn't primarily looking to replace Microsoft Outlook and other client-side e-mail apps, but rather server-side platforms such as Exchange. The e-commerce giant argues its solution will be easier to use/deploy than alternatives, and also offer better security on account of having all data encrypted with customer-managed keys.
- This isn't the first time Amazon has layered a value-added business service on top of AWS: It has already launched Workspaces, a PC virtual desktop solution, and Zocalo, an enterprise cloud storage/document-sharing platform.
- Pricing is aggressive, but not incredibly so: Amazon is charging $4/user/month for WorkMail on a standalone basis (50GB of storage), and $6/user/month if bundled with 200GB of Zocalo storage. Forbes' Ben Kepes is impressed with the offering, but also would like to see Amazon provide more storage and "make a foray into broader office productivity functionality."
Tue, Jan. 27, 12:40 PM
Tue, Jan. 27, 9:22 AM
- After selling off yesterday in response to Seagate's guidance, Intel (NASDAQ:INTC) and HP (NYSE:HPQ) are showing steep losses in premarket trading today after Microsoft (NASDAQ:MSFT) reported 13% Y/Y drops in both its Windows OEM Pro and non-Pro revenue, and offered conservative guidance. Microsoft is down 8.3%, and Nasdaq 100 futures are off 1.4%.
- Microsoft blamed the Windows OEM Pro decline on slowing business PC demand (following a boost driven by the end of Win. XP support), an unfavorable mix, and academic discounts. The OEM non-Pro decline was blamed on a mix shift towards cheaper hardware for which the software giant has cut or eliminated Windows licensing fees.
- Microsoft's server/data center-related sales were healthier: Server product/services revenue rose 9%, and commercial cloud revenue (Office 365/Azure) grew 114%. But on the CC (transcript), the company stated transactional server revenue "was down primarily due to a declining traditional server market." A shift in demand towards Web/cloud data centers often relying on Linux servers might also be a factor here.
Tue, Jan. 27, 9:10 AM
Tue, Jan. 27, 7:43 AM
- "After a lengthy 16-month period of multiple expansion for Microsoft’s (NASDAQ:MSFT) stock, we see a tougher transition ahead, and move to the sidelines," says Nomura's Rick Sherlund, cutting to Neutral with the price target lowered to $50 from $56.
- JPMorgan downgrades to Neutral with price target cut to $47 from $53.
- Never a big fan in the first place, Citi cuts to Sell from Neutral.
- MKM Parters downgrades to Neutral.
- Shares -7.8% premarket
- Previous earnings coverage
Mon, Jan. 26, 6:42 PM
- Microsoft (NASDAQ:MSFT) guides (.ppt) for its reporting units to collectively have FQ3 revenue of $20.6B-$21.4B, below a $23.8B total revenue consensus. Corporate/other revenue, which totaled $314M in FQ2, isn't included in the guidance. Forex is expected to hurt revenue growth by ~4%.
- Full-year operating expense guidance has been cut by $1B to $33.2B-$33.6B. Another $200M worth of restructuring charges are expected over the rest of FY15 (ends June '15), yielding total charges of $1.4B. FY15 tax rate guidance is at 22%-24%; the FQ2 tax rate was 25%.
- In its earnings slides (.ppt), Microsoft states its unearned revenue balance was $21.2B at the end of FQ2, +9% Y/Y but slightly below historical seasonality due to forex and the recognition of $300M worth of prior period deferrals. The contracted but not billed balance was above $24B.
- Office 365 consumer subs rose by 30% Q/Q to 9.2M, and first-party game revenue (boosted by the Mojang acquisition) rose 79%. Though Microsoft is in the midst of paring back its feature phone ops 39.7M non-Lumia phones were still sold (to go with 10.5M Lumias).
- $1.5B was spent on capex during the quarter. Capex is expected to rise Q/Q in FQ3 due to cloud investments. Excluding the Nokia deal, opex fell 8% Y/Y (+1% otherwise).
- MSFT -4.3% AH to $44.99. FQ2 results, details.
Mon, Jan. 26, 4:42 PM
- Microsoft's (NASDAQ:MSFT) Window OEM Pro and non-Pro revenue both fell 13% Y/Y in FQ2. The Pro slowdown is blamed on slowing business PC sales, academic discounts, and "mix returning to pre-Windows XP end of support levels." The non-Pro decline is due to unit growth coming from cheaper hardware that Microsoft is providing discounted license fees for. Commercial Windows volume license revenue rose 3%.
- Total Commercial revenue rose 5% Y/Y in FQ2 to $13.3B, helping drive the revenue beat. Devices & Consumer revenue (lifted by the Nokia deal) rose 8% to $12.9B. Commercial reporting segments accounted for over 2/3 of FQ2 gross profit of $16.3B.
- Segment performance: Commercial licensing revenue -2% Y/Y to $10.7B (hurt by the cloud shift). Commercial other +46% to $2.6B (boosted by cloud growth). Device/consumer licensing -25% to $4.2B (Windows and Android royalty declines). Computing/gaming hardware -11% to $4B (Xbox One launched a year ago). Phone hardware revenue was $2.3B, above guidance of $2B-$2.2B but down from FQ1's $2.6B (feature phone decline).
- Highlights: 1) Commercial cloud revenue (Office 365, Azure, Dynamics online) +114% Y/Y, and now on a $5.5B/year run rate 2) 10.5M Lumias and 6.6M Xboxes were sold. Surface revenue +24% to $1.1B. 3) Server products/services +9%, with double-digit SQL Server and System Center growth. 4) Search ad revenue +23%; Bing's U.S. share is at 19.7% (per comScore).
- With Nokia boosting spending levels in spite of last year's job cuts, R&D spend rose 6% to $2.9B, and sales/marketing 7% to $4.3B. G&A, however, fell 8% to $1.1B.
- $2.1B was spent on buybacks. Microsoft plans to complete its existing $40B buyback program (launched in Sep. 2013) by the end of 2016.
- Microsoft is at $45.59 in AH trading. Guidance will be provided on the CC.
- FQ2 results, PR
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Microsoft Corp is engaged in designing, manufacturing, selling devices, and online advertising to a global customer audience. Its products include operating systems for computing devices, servers, phones, and other intelligent devices.
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