Wed, Apr. 29, 7:16 PM
- Microsoft (NASDAQ:MSFT) is aiming for a $20B/year run rate for its Commercial Cloud reporting segment by FY18 (ends June '18), says Satya Nadella at an analyst meeting (webcast) held amid the company's BUILD conference. Microsoft announced last week Commercial Cloud, a term that covers Azure cloud infrastructure/app platform services, commercial Office 365 sales, and Dynamics Online business app sales, was on a $6.3B/year run rate.
- Assuming the target is hit, some of that growth will come from the migration of traditional Office and Dynamics licensees to cloud subscriptions. But Nadella promises there will be plenty of other growth as well. "This is not a one-for-one shift. There is actually a pretty significant expansion of the value we can deliver.”
- M&A, of course, could also expand the division. Bloomberg reported earlier today cloud CRM software giant Salesforce (current market cap of $47B) was approached by a potential acquirer. Much of the speculation about the rumored suitor revolves around Microsoft and Oracle.
- Also: With Windows users now getting free upgrades and Microsoft increasingly looking to monetize the OS via services, the company says it will recognize Windows 10 license revenue over a 3-year period. Windows license revenue has traditionally been recognized up-front.
- Earlier: Microsoft launches new developer tools, Azure services
Wed, Apr. 29, 2:25 PM
- Furthering its efforts to win over iOS/Android developers (many of whom have been historically wary of the company), Microsoft (MSFT -0.4%) has used the first day of its 2015 BUILD developer conference to launch Islandwood and Astoria, projects that respectively allow iOS apps to be ported to Windows 10 and Android apps to run within Windows unmodified.
- The efforts follow the December acquisition of HockeyApp (a provider of iOS/Android app crash analytics tools), and a promise that the next version of its core Visual Studio developer suite (Visual Studio 2015) would be "built from the ground up with support for iOS, Android and Windows."
- Also launching: 1) Visual Studio Code, a free cross-platform code editor for writing Web/cloud apps. Microsoft has already made Visual Studio 2013 free to non-enterprise users in an attempt to win new developers. 2) Tools for presenting sites as apps, and for quickly modifying Windows apps so that they can be offered through the Windows Store.
- Meanwhile, Microsoft has continued its barrage of Azure cloud service launches; its newest services are aimed at big data/analytics projects. One new service in preview mode (Azure SQL Data Warehouse) covers the building of structured data repositories, and the other (Azure Data Lake) unstructured repositories (prior analytics launches).
- Microsoft states it's selling over 90K new Azure subscriptions per month, and that over 40% of its Azure revenue comes from startups and independent software firms. Synergy Research estimates Azure's revenue rose 96% Y/Y in Q1, and that its IaaS/PaaS share is around 10% (#2 behind Amazon's 29%).
- Others news: 1) Microsoft has named its anticipated Spartan browser (ships with Windows 10) Edge. 2) The company predicts Windows 10 will be installed on 1B devices (inc. smartphones/tablets and the Xbox One) in 2-3 years. 3) Windows Holographic, Microsoft's platform for building HoloLens headset apps, has officially launched.
Fri, Apr. 24, 2:32 PM
- "By calendar 2016, we believe organic [constant currency] growth returns to low single digits with growing cloud business and earnings growth can potentially be restored to 10% or so with the leverage of share repurchase, and continued strong cash flow generation," writes Nomura's Rick Sherlund, upgrading Microsoft (NASDAQ:MSFT) to Buy following its FQ3 beat. His target remains at $50.
- Sherlund, who downgraded in January on account of Microsoft's FQ2 numbers, still thinks the company will be in a transition period for a few quarters, and notes certain core businesses (e.g. Windows, traditional Office licenses) were soft. However, he thinks total Office revenue (traditional + 365) could start rising again in 2016 "given high interest and migrations among business users to Office 365 and new cross platform productivity tools for Windows, iOS and Android."
- "In our view, Microsoft is well ahead of its large cap value peer group in the transition to the cloud," says UBS' Brent Thill (Buy, $50 target). Pac Crest's Brendan Barnicle (Outperform, $50 target) observes Office 365 still covers less than 10% of the Office installed base, leaving plenty of room for growth. He estimates Azure is on a $1.5B/year revenue rate (compares with $5.16B in trailing revenue for AWS and a $6.3B/year run rate for Microsoft's broader commercial cloud ops).
- On the CC (transcript), CFO Amy Hood stated Microsoft's FY15 (ends in June) opex guidance ($32.4B-$32.5B) is now $2B lower than where it initially was. Adjusting for forex and the Nokia deal, opex rose just 1% Y/Y in FQ3 thanks to job cuts. Meanwhile, Satya Nadella mentioned Office iOS/Android app downloads have topped 100M.
- Prior Microsoft earnings coverage
Fri, Apr. 24, 9:17 AM
Thu, Apr. 23, 6:57 PM
- Continuing its habit of guiding cautiously, Microsoft (NASDAQ:MSFT) has guided (.ppt) on its FQ3 CC for its various business units to have FQ4 revenue of $21.6B-$22.3B, below a $22.7B consensus. Corporate/other revenue (-$20M in FQ3, $314M in FQ2) isn't included in the forecast.
- Forex is expected to have a 4% impact on FQ4 revenue growth, up from 3% in FQ3. The unearned revenue balance ($20.2B at the end of FQ3, +4% Y/Y) is expected to rise Q/Q, in-line with seasonality save for forex.
- In its earnings slides (.ppt), Microsoft notes Office consumer revenue fell 41% Y/Y. 27% of the decline is attributed to the transition to Office 365 subscriptions from up-front licenses, and the rest to weak Japanese sales (they were strong a year ago ahead of a tax hike). "Windows Phone" revenue (includes Android royalties) fell 19% thanks to a mix shift towards low-royalty phones.
- Xbox platform revenue fell 24% due to lower Xbox One sales and a mix shift towards cheaper models. Lumia phone sales (8.6M) were up 18% Y/Y; 24.7M non-Lumia phones were sold (down Y/Y).
- Premium versions of Windows Server, System Center, and SQL Server were a strong point: Their collective sales rose 25% ahead of the July end of Windows Server 2003 support. Microsoft also reports Azure compute usage more than doubled (Azure revenue isn't broken out), and that enterprise mobility (EMM) customers rose over 70% to more than 13K; Microsoft launched an EMM suite last May.
- Microsoft is now at $45.10 AH. FQ3 results, details, PR.
Thu, Apr. 23, 4:54 PM
- In spite of 2% Y/Y drops in Windows volume license and Office commercial sales - the latter is hurt by the shift to Office 365 subscriptions from up-front licenses, which pushes out revenue recognition - Microsoft's (NASDAQ:MSFT) Commercial revenue rose 5% Y/Y in FQ3 to $12.8B, even with FQ2's pace and helping revenue/EPS beat estimates. A 12% increase in server product/services revenue (improved from FQ2's 9%) contributed, as did a 106% increase in commercial cloud revenue (nearly even with FQ2's 114%).
- As expected, Windows OEM license revenue (hurt by both weak PC sales and discounts for smaller/cheaper devices) was soft: OEM Pro revenue fell 19% and non-Pro revenue 26%.
- Also as expected: Forex took a toll on sales. GAAP revenue growth (boosted by the Nokia deal) was 9% Y/Y in constant currency vs. 6% in actual dollars.
- Surface revenue rose 44% to $713M. Phone hardware revenue totaled $1.4B, with 8.6M Lumias sold (10.5M were sold in seasonally strong FQ2). Search ad revenue rose 21% (no dollar amount is given). Commercial cloud revenue is now on a $6.3B/year run rate, up from $5.5B a quarter ago. Consumer Office 365 subs rose by 3.2M Q/Q to over 12.4M.
- $5.1B was spent on buybacks, giving a lift to EPS. While revenue rose 6%, gross profit (affected by high capex and a shift towards hardware and cloud revenue) rose only 1%. Microsoft ended FQ3 with $95.4B in cash/short-term investments (much of it offshore), and $29.3B in debt.
- Shares have risen to $44.65 AH. FQ3 results, PR.
Thu, Apr. 23, 4:11 PM
Wed, Apr. 22, 5:35 PM
- ACTG, ALGN, ALTR, AMZN, AWAY, BAS, BCR, BGS, BJRI, BLDR, CB, CBI, COF, CPHD, CVTI, CYN, DGII, DV, EFII, ELY, ETFC, ETH, FET, FICO, FII, FR, FSL, GHL, GIMO, GOOG, HA, HBHC, HBI, HUBG, HWAY, JNPR, KLAC, KN, LSTR, MKTO, MMSI, MSCC, MSFT, MTSN, MXIM, MXWL, N, NEM, NTGR, P, PEB, PFG, QDEL, QLIK, RGA, RHI, RMD, RSG, SBAC, SBUX, SFG, SHOR, SIVB, SPNC, SRCL, SWN, SYA, SYNA, TRN, UIS, VCRA, VRSN, WIRE, WRE
Tue, Apr. 21, 2:22 AM
- According to a new filing, Yahoo (NASDAQ:YHOO) and Microsoft (NASDAQ:MSFT) have amended the terms of their 10-year search pact to allow either party terminate their agreement at any point in time on or after Oct. 1.
- Under the original deal, which began in February 2010, Yahoo could only terminate the pact if the revenue from each search failed to meet certain financial-performance benchmarks.
- The two also restructured the agreement's search terms last week, stating the partnership is non-exclusive for both desktop and mobile.
- Yahoo reports earnings after the bell today.
- Previously: Microsoft, Yahoo restructure search pact; no PC/mobile exclusivity (Apr. 16 2015)
Mon, Apr. 20, 1:55 PM
- "With the Windows 10 launch at the end of July, we are watching sort of the impact of that on the back-to-school season, and expect that it might have a bit of a delay to the normal back-to-school season inventory build-up," said AMD CEO Lisa Su during last Thursday's earnings CC (transcript).
- To date, Microsoft (NASDAQ:MSFT) has only said Windows 10 (currently in the technical preview stage) will launch at some point this summer. AMD is among the Microsoft partners likely to be given advance notice about the software giant's launch plans.
- A late-July launch would make the OS available in time for the back-to-school season, and would be well-received by a PC industry that just had a very rough Q1 caused in large part by soft enterprise and desktop demand. Windows 10 contains a bevy of enterprise-friendly features meant to win over businesses that shunned Windows 8. It will also be available as a free upgrade for users of both legitimate and pirated Windows copies, though the latter will still be viewed as unlicensed.
- Separately, Microsoft has launched Azure Service Fabric, a framework that helps developers scale and customize Azure-based services more easily. The solution relies on breaking complex apps into "microservices" that can be jointly managed and automated, and programmed via Visual Studio. It follows the March launch of Azure App Service, a cross-platform Web/mobile app development service.
- Microsoft is up strongly amid a 1.2% gain for the Nasdaq. Earnings arrive on Thursday.
Thu, Apr. 16, 9:48 AM
- Following months of talks, Yahoo (YHOO +0.2%) and Microsoft (MSFT -0.4%) have restructured their search alliance (struck in 2009, lasts until 2020). Notably, Yahoo will "now have increased flexibility to enhance the search experience on any platform, since the partnership is non-exclusive for both desktop and mobile."
- The companies previously disclosed the alliance was non-exclusive on mobile, but hadn't announced anything similar for PCs. They now only state Yahoo "will continue to serve Bing ads and search results for a majority of its desktop search traffic."
- At the same time, Microsoft will now "become the exclusive salesforce for ads delivered by Microsoft's Bing Ads platform." Yahoo will continue exclusively providing the salesforce for its Gemini mobile search/native ad platform.
- "Satya [Nadella] and I have worked closely together to establish a revised search agreement that allows us to enhance our user experience and innovate more in our search business," says Marissa Mayer, who has previously voiced disappointment about the performance of the Microsoft deal.
- The deal has required Microsoft to make revenue per search (RPS) guarantees equal to a % of Google's estimated RPS. Thanks to RPS payment changes, Yahoo's search revenue (ex-TAC) was flat Y/Y in Q4, even though its search click-based revenue (excludes RPS payments) was up 18%.
- The restructuring follows a deal by Yahoo to displace Google as Firefox's default U.S. search provider, and comes amid reports Yahoo/Microsoft are trying to sell Apple on replacing Google as Safari's default provider (including on iOS). comScore estimates Bing had a 20.1% March U.S. PC search share, and Yahoo a 12.7% share; international shares are lower.
Tue, Apr. 14, 1:35 PM
- Datazen, declared by Microsoft (MSFT -0.6%) to be "an industry leader" in the mobile business intelligence/data visualization software space, offers Windows, iOS, and Android apps (along with server-side software) for easily viewing/publishing business metrics and creating interactive dashboards that render well on devices large and small.
- Microsoft has bought the startup for an undisclosed sum; the company declares the deal furthers its efforts to offer "easy-to-use, accessible tools to extract maximum value from data – from anywhere, on any device." Datazen's offerings complement Microsoft's cloud-based Power BI business intelligence tools.
- Notably, Microsoft will be bundling Datazen's server software for free with its SQL Server database; Datazen's client apps have already been free to download. The software giant also plans to integrate Datazen's tech with Power BI (available via free and pro versions) to "give our customers another hybrid bridge for their on-premises investment to the cloud."
- The deal strengthens Microsoft's ability to compete against the likes of Tableau (DATA -0.6%) and Qlik (QLIK +1.4%), which both already offer mobile-friendly BI/visualization tools that can be used by non-IT personnel. Tableau, which has been grabbing share from BI incumbents, posted 75% Y/Y sales growth in Q4.
- In January, Microsoft bought Revolution Analytics, a provider of advanced data analysis/modeling tools for statisticians and data scientists. FQ3 results are due on April 23.
Mon, Apr. 13, 2:02 PM
- Kurt DelBene, who stepped down as Microsoft's (MSFT +0.2%) Office division chief in 2013 as part of Steve Ballmer's big reorg, has returned to the company to be its EVP of corporate strategy and planning. He'll report to Satya Nadella.
- During his time away from Microsoft, DelBene oversaw efforts to fix Healthcare.gov. In his new job, he'll "lead both cross-engineering and cross-business strategy and execution initiatives with an emphasis on opportunities that span product and engineering boundaries."
- Microsoft has seen plenty of C-Suite changes since Nadella became CEO 14 months ago. Business development chief Tony Bates and marketing EVP Tami Reller left in March 2014; Qualcomm exec Peggy Johnson was eventually hired to fill Bates' position. Last May, execs Scott Guthrie and Phil Spencer were respectively tapped to run Microsoft's enterprise/cloud and Xbox unit.
Sat, Apr. 11, 7:04 PM
- Following an NYT column featuring remarks from exec Bill Hilf that that were taken to suggest HP (NYSE:HPQ) is exiting the public cloud infrastructure (IaaS) market, HP has told CRN it remains committed to the space. However, the IT giant adds (echoing Hilf's remarks) it's "not competing head-to-head with the big public cloud players," such as Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT).
- HP's comments follow the February departure of top cloud exec Marten Mickos (joined via the Eucalyptus acquisition), and the splitting of his responsibilities between Hilf and two other execs. The company entered the public cloud market in 2012, and (like many other enterprise IT firms) has been a backer of the OpenStack IaaS platform (pitched as an open-source alternative to Amazon/Google/Microsoft's proprietary offerings). HP asserts it has the largest OpenStack public cloud in existence.
- HP's stance arguably highlights the challenges traditional enterprise IT names face in countering the cost and scale advantages possessed by IaaS market leaders, who have often eschewed the hardware of IT giants in favor of cheap white-label hardware produced by Asian contract manufacturers. HP has partnered with Taiwan's Foxconnn and Accton to offer white-box gear for cloud providers.
- Synergy Research estimates the broader "cloud infrastructure service" market (covers IaaS and PaaS, as well as private and hybrid clouds) grew 48% in 2014 to $16B, as more on-premise workloads get migrated to cloud environments and various cloud service providers relying on IaaS/PaaS infrastructures see rapid growth. Amazon towered over the space with a near-30% share, close to 3x that of #2 Microsoft. IBM, Google, and Salesforce (NYSE:CRM) rounded out the top 5.
Thu, Apr. 9, 6:03 PM
- As Intel's (NASDAQ:INTC) March 12 warning led many to expect, PC sales were weak in Q1: IDC estimates shipments fell 6.7% Y/Y to 68.5M, a much sharper drop than Q4's 2.4% and Q3/Q2's 1.7%. Gartner estimates shipments fell 5.2% to 71.7M. With IDC also reporting of price pressure, revenue declines might be larger.
- IDC: [T]he Q1 market faced multiple headwinds – including inventory build-up of Windows Bing based notebooks, commercial slow down following the [Windows] XP refresh and constrained demand in many regions due to currency fluctuations and unfavorable economic indicators." Gartner thinks sales of "mobile PCs" (notebooks, convertibles, and Windows tablets) rose, while desktop sales fell sharply. "PC replacements will be driven by thin and light notebooks with tablet functionality."
- Both Gartner and IDC report U.S. PC shipments fell only ~1% Y/Y. On the other hand, IDC thinks Japan (another high-ASP market) saw shipments fall 44%; strong Q1 2014 spending prior to a tax hike made for tough comps.
- Market leaders Lenovo (OTCPK:LNVGY) and HP (NYSE:HPQ) continued taking share from firms with less scale: IDC estimates Lenovo's share rose to 19.6% from 17.6% a year ago (3.4% unit growth), and HP's to 19% from 17.1% (3.3% unit growth).
- #3 Dell's share rose to 13.5% from 13.4%; #4 Asus (OTC:ASUUY) was flat at 7.1%, and #5 Acer (OTC:ASIYF) rose to 7% from 6.3%. Everyone else collectively fell to 33.9% from 38.4%.
- Unlike in Q4 and Q3 (seasonally stronger quarters for the company), Apple (NASDAQ:AAPL) wasn't in the global top-5. IDC estimates the company's US. unit share rose to 10.9% from 10.6%, good for fourth place (revenue share is higher).
- Other PC industry names: MSFT, AMD, NVDA, MU, STX, WDC, HTCH
Mon, Apr. 6, 10:06 AM
- "While the consensus estimate clearly needs to come down, we believe the stock is already pricing in one last round of EPS reductions," writes Wells Fargo's Jason Maynard, upgrading Microsoft (MSFT +0.9%) to Outperform and setting a $46-$50 valuation range. "Outside the obvious cuts to estimates we see a lot of product and business trends to like."
- Maynard: "We like the company's current focus on mobility and cloud, and think that there is room for multiple expansion as the company gets through its transition ... We think the strategic position has improved with the new cloud/mobile product introductions, the "software anywhere" cross-platform approach, and disciplined cost controls...the 3 percent dividend yield provides a cushion at the $40 level."
- The upgrade comes with shares down nearly 20% from a 52-week high of $50.04 going into today, thanks in part to Microsoft's FQ2 numbers and Intel's warning. The software giant trades for 14x its FY16 (ends June '16) EPS consensus. ~$9/share in net cash/investments are on the balance sheet.
- Meanwhile, Bill Gates has penned a letter to Microsoft employees for the company's 40th anniversary. "We already live in a multi-platform world, and computing will become even more pervasive. We are nearing the point where computers and robots will be able to see, move, and interact naturally ... Under Satya’s leadership, Microsoft is better positioned than ever to lead these advances."
Other News & PR