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Microsoft Shares Soar to Record on Earnings Boost From Cloud
- tonyedgecombe 10y agoIs it a real increase in revenue or just smoke and mirrors from shifting Office revenue again?
- trendia 10y agoI wonder this too. Suppose you switch a product from one purchase of $120 to $10/month. In the first case, you can forecast $120 for every time a person buys the product. (Once every few years), so $120/2 years However, with $10/mo, you can forecast for every month in the upcoming years. So $240/2 years.
- Analemma_ 10y agoYou guys know that institutional Wall Street investors aren't total idiots, right? They know this as well as you do. On the earnings call yesterday, more than one person specifically asked about the impact on revenue numbers of the migration from one-off to recurring payments, and seemed satisfied with the answers they got.
- trendia 10y agoI'm not calling anyone an idiot, I'm just wondering whether their increase in share price is the result of developing new products or simply moving old products to a subscription model.
- jtrtoo 10y agoCreating useful /comparable to the end user editions of old (packaged software) products and offering them in a new way entirely is developing a new product. People aren't simply signing up to pay by the month (though that can be desirable to some folks in itself). They're actually getting something different.
- drieddust 10y agoOnly service I have really seen being used is O365 emails. Rest of the Azure is not really being used by most of our customer. They are still dipping their toes in water so yeah it look like smoke and mirrors. At least in my anecdotal experience. Edit: I don't have an issue with down votes but seems like some people are angry. I just shared my experience.Can Microsoft show what is the revenue growth in absolute terms.They are including Azure credits into the Enterprise License Agreement and calling it cloud revenue. Availability of free credits does not translate into adoption necessarily. Enterprise customers are still evaluating the how costs will look like over a period of time.
- jbigelow76 10y agoGoogle reported revenue of $20.76 billion last quarter, but I don't use Google as my search engine, so I'm pretty skeptical of this number.
- drieddust 10y agoYou should be if Google suddenly starts reporting revenue growth in "Self Driving Cars" category and their total revenue still stays $20.76 billion.
- csydas 10y agoVirtualization is taking to the cloud in a big way this year and next. Most of my clients are pricing out between azure, aws, and local providers/partners for their cloud VM needs. Vmware just announced a deal with Amazon I believe and windows server 2016 comes with gobs of stuff that's pretty clearly meant for being hosted up on azure. It's not there yet for many since the WAN component is still too weak for many companies to migrate but when the need to remake comes up I'm seeing it in the cloud more and more, or dummy drops to the cloud. (Usb backup on premise and deliver the drive to cloud provider.)
- drieddust 10y agoAgreed Windows 2016 could be a game changer.
- FUCK__GOOGLE 10y agoMy experience with Azure thus far has been not so great. Everything mostly works but the portal is just so painfully slow and difficult to coax along. Kind of doubt they will see the sort of exciting growth that AWS has seen, so yeah looking at accounting details would be key here.
- jesusjzp 10y agoPortal is one of the interfaces for Azure resources management. I'd highly suggest you to take a look at PowerShell CLI and Azure Node.js CLI.
- jongalloway2 10y agoThere's also a new (preview) python-based CLI that's pretty nice: https://azure.microsoft.com/en-us/blog/announcing-azure-cli-2-preview/ https://azure.microsoft.com/en-us/blog/announcing-azure-cli-...
- mattmanser 10y agoSeriously? The portal is bad so use a CLI? I don't want to have to look up the commands every time I want to run a thing I do once a month, quarter or year. I just want to click a button that doesn't take 20 fucking seconds to load and isn't buried amongst a ton of useless menu items. The joke in our office is that the Azure team gave the portal interface to the interns to do. It's a UI that's poorly thought out, poorly programmed and massively unresponsive. It's so obviously been conceived of by a programmer who is inappropriately obsessed with their "innovative" modular design. But a CLI? Certain types of people with amazing memories like CLIs, but please don't inflict them on the rest of us. They're shit. AWS's portal is good enough, but Azure's is rubbish.
- solipsism 10y agoCertain types of people with amazing memories like CLIs, but please don't inflict them on the rest of us. They're shit. Stupid thing to say. CLIs are much more flexible than GUIs. You can't feed one GUI component's output into the input of another. They're not for everyone or for every use-case. But CLIs will be around longer than you will.
- sargun 10y agoOffice is cloud ;-)
- gefh 10y agoWe have always been at war with Eastasia.
- geff82 10y agoI see enormous rates of adoption... Office 97 could easily be replaced by Staroffice if you wanted, but Office 365 is almost impossible to escape once you have put your data on it.
- samfisher83 10y agoIf you look at the numbers their cash over the past few years have been relatively stable about ~24 billion in FCF. Now if we model that as a Perpetuity with 10% rate which has been historical rate of the market we get 24/.1=240 (not including inflation) if we add Net Tang Assets and some tax benefits if we write down goodwill we we end up with 56billion. However MSFT is trading for 450 billion. Where is this extra 150 billion coming from? Cloud has about 10% margin I don't see how the numbers add up.
- fanzhang 10y agoIn this era of low interest rates, you might model the above with a 7% rate instead of 10%, and then you get closer.
- samfisher83 10y agoYou don't use interest rates you use a discount rate. Basically what you can earn with that money if you invest in the market.
- dharmon 10y agoHe's saying that in this low interest rate environment investors are not demanding 10%, but would rather be happy with something like 7 or 8% as their hurdle rate. In finance speak, MSFT's cost of capital is dependent on the risk-free rate, usually the 10-year US treasury, which is incredibly low right now, thus moving MSFT's cost of capital (the 0.1 in your denominator) lower. A quick search tells me that their cost of capital is currently around 7%. Also, you can't add assets in, since operating assets are required to generate that FCF. You can add in cash, though, which is pretty substantial for MSFT.
- samfisher83 10y agoIf you are evaluating a project from the MSFT perspective you might want to use their cost of capital, but as an investor if I can go get 10% why would I want to use 7% as my rate? In any case lets use your 7% you end up with 400bill which is still 50billion less than what it is trading at.
- meira 10y agoThis is not a bubble. Let's not talk about a bubble.
- lokeshk 10y agoBut, I thought pg said Microsoft was dead.
- calbear81 10y agoThe old Ballmer era Microsoft is dead; the Satya led Microsoft has risen.
- WayneBro 10y agoThere are two things that we know for sure: - Microsoft is not dead. - Paul Graham is a tedious windbag. (Look it up.)
- toomuchtodo 10y ago> Paul Graham is a tedious windbag. (Look it up.) Well, I think this is a bit rude. I myself am not a PG fan, but let's not be mean people about it (I come here because the decency high water mark is usually higher than other forums). Some people have a track record, and you might trust them more because of it. They might still be wrong. Don't hold people up as demigods?
- sremani 10y agoI politically disagree with pg, but that man is a genius no ifs and buts.
- oldmanjay 10y agoI'm not expressing an opinion about anyone with this; I would like to point out that being a genius is no bulwark against being a tedious windbag. Or heartbreakingly stupid. Or anything, really.
- tim333 10y agopg's position was "No one is even afraid of Microsoft anymore. They still make a lot of money—so does IBM, for that matter. But they're not dangerous." Which I think remains largely true?
- thedangler 10y agoIt's funny that I didn't take my own advice 4 years ago. A colleague asked me what stocks she should buy and I said Microsoft. She bought in at around $20 something. I don't know how many she bought.
- sakopov 10y agoI own MS shares and have been pleasantly surprised how stable MS stock is compared to other tech stocks.
- nashashmi 10y agoIt still is a good buy. Microsoft is consolidating in the stable stuff and making incremental improvements to all of them. Plus they are giving back, which in HN opinion, makes them relevant again. The future is modestly nice.
- Bud 10y agoEven as a longtime Apple fan and inveterate Microsoft-hater, I have to hand it to Satya Nadella and Microsoft as a whole. Their success is deserved. I work with basically the full range of Microsoft products in my job and what I see is that everything has improved lately. Windows is better, Office is better, their cloud offerings are better, and even the Surface is better. Now, if they would only improve the licensing process for Windows so that it doesn't drive people insane, that would be amazing.
- aswanson 10y agoVisual Studios integration with so many other non-microsoft languages and packages is excellent. As a former msft hater, I have to agree with the parent.
- mattnewton 10y agoI was with you until the "windows is better part" Windows 10 has been the worst desktop experience I have ever encountered. From day 1 I have had driver issues, forced updates, no matter how I configure the time zone resets to GMT (which is great because it uses 3am as a time to restart and force installing updates). To say nothing if the awful UI. I had none of these issues with Ubuntu and I paid Microsoft for this headache so I could play games. I can't wait for more AAA Linux support, please take it home Valve.
- euroclydon 10y agoWindows 10 is more like a new product than not. It's going to take some time. I think that's okay, as long as the fundamental features of the OS are good, the compatibility and stability will catch up.
- elcct 10y agoMaybe you are the unlucky one. I wouldn't trade windows 10 for anything else.
- criddell 10y agoWindows 10 is 90% great for me. The 10% that annoys me is mostly around the way update works. If you have long running processes (like security camera DVR software, big render jobs, etc...) having the OS decide to reboot in the middle of the night is a bit of a headache. I know you can disable the update service, but it would be nice if they just put that in the windows update UI. The other part that bugs me are the re-appearing bloatware apps like 3d builder, weather, contacts, xbox, groove music, etc.... The flipside of the reappearing apps issue is Microsoft uninstalling my VPN client. They don't think it's compatible with W10, but it works perfectly for me so I have to reinstall it every time. To get back on topic though, Microsoft's Azure is fantastic. The earnings boost is well deserved.
- hollerith 10y ago>The shares surged as much as 5.6 percent to a record $60.45. The last time Microsoft was trading near that level was in 1999. Using share price is suboptimal because the number of shares outstanding has decreased significantly since 1999. Better to use market cap (which is share price times the number of shares outstanding). (According to wikipedia) Microsoft reached a market cap of $618.9 billion in December 1999, which is $879 billion in 2015 dollars. In contrast, Microsoft's market cap today is significantly less, namely, $447.5 billion. BTW, in Feb 2015, Apple reached a market cap of $775 billion. Since the computing industry's share of the economy was significantly lower in 1999 than it was in 2015, the data on market caps suggests that the 1999 version of Microsoft was significantly more dominant over the industry than the 2015 version of Apple was.
- hacknat 10y agoYeah, but 1999 was a mother-of-a-bubble.
- ucha 10y agoYou understand though that if MSFT had 100B USD in cash and spent it all in stock repurchase, then, in theory, its stock price wouldn't move but its market cap would go down by 100B. The market cap is not a perfect indicator of the value of a business either. If we start to nitpick, why not calculate share price in real dollar terms (take inflation into account), adjust for the average P/E ratio of US stocks, adjust for dividends etc... That quote is just trivia.
- insightful 10y agoYour assumption is completely and absolutely wrong. Not just wrong, but actually the opposite of the traditional reality -- market cap usually doesn't even consider cash and short term equity reserves for traditional companies, so you end up with companies that have more book value than market value. Which is exactly why these companies buy back shares -- a smaller circulation benefits their shareholders more than money sitting in an account on the company books.
- arcanus 10y ago
- grandalf 10y agoMicrosoft has hired a large team of economists, econometricians, etc. to help drive strategy in Cloud. Looks like it's paying off nicely. Preston McAfee is a very clever guy and has seemingly been able to recruit top tier econometricians out of academic positions: http://vita.mcafee.cc/ http://vita.mcafee.cc/
- fnbr 10y agoMicrosoft has been doing an incredible job lately. With the announcement of native support for Ubuntu binaries, I've been excited to try Microsoft products for the first time. Additionally, as someone who writes a lot of bash scripts, I'm excited that I'll be able to use them across platforms. The two main reasons I use Apple computers instead of Windows are build quality & the UNIXy background of macOS, and with their recent moves, they remove the last reason as a differentiating factor. Even their cloud offerings are exciting. I use R to do a lot of statistics work, and now Excel has support for integrating R scripts hosted on Azure. This makes it much, much, much easier to get R code working in an enterprise setting, which has been a major hurdle for me previously.
- IndianAstronaut 10y agoHave you tried SQL Server R integration? Wondering if it helps to scale up R.
- fnbr 10y agoNo, I haven't had the right project come up (I'm a statistical consultant, so my projects are largely determined by my clients). I've heard really good things about it though. It's supposed to scale well. It's on the list as something I plan to use in the near future. We've had projects in the past where we shipping Excel workbooks that had VBA written to integrate with R from the command line, which is a horrible thing to do to both Excel and R. Replacing that with a cleaner integration will be nice.
- JustSomeNobody 10y agoLet's all celebrate "The Cloud" as half[0] the East coast internet is blacked out by a DDoS attack. [0] I love exaggerating for drama.
- anon987 10y agoFriendly reminder: Less than a year ago Steve Balmer himself called Microsoft's cloud numbers "bullshit" http://www.computerworld.com/article/3011662/cloud-computing/microsoft-revenues-steve-ballmer-bullsshh-bullsshh-bullsshh-bullsshh-itbwcw.html http://www.computerworld.com/article/3011662/cloud-computing...
- blahi 10y agoAnother friendly reminder: Steve Ballmer is super mad at Gates and the board for ousting him. He is especially mad at Gates all the way back from succession. He obviously hates Nadella too. Jealousy is a bitch.
- sunstone 10y agoWould would ever have bet that Microsoft would kick Google's butt in the cloud? Not me.
- bitmapbrother 10y agoGiven their low market share they're not kicking anyone's butt.
- NetStrikeForce 10y agohttps://rcpmag.com/articles/2016/08/02/microsoft-behind-aws-in-cloud.aspx?m=2 https://rcpmag.com/articles/2016/08/02/microsoft-behind-aws-... Azure seems to have higher market share though? In HN I rarely see talk about Azure and I see a lot of Google Cloud. Out there, where I consult with enterprise customers among other things, I see a lot of Azure and almost no Google. It would seem that Google sells well among startups and in the Bay Area while Microsoft sells a lot to enterprise.
- bitmapbrother 10y agoThe chart you linked to showed one thing very clearly - AWS is kicking everyone's butt. In terms of YoY growth, Google was the biggest at 162%. Microsoft and IBM should be very concerned about that considering all of the new datacenters Google has coming online in 2017.
- erikpukinskis 10y agoJust took a look at MSFT. I was surprised to see that the stock has been climbing basically linearly for a solid 5 years now. I wanted to revisit the CEO/stock price graph now that we've seen a bit of Nadella's performance: http://i.imgur.com/lr9j2KS.png http://i.imgur.com/lr9j2KS.png I was expect to see a nice perfect correlation of Ballmer = flat stock price, but it actually looks like the upturn began during his tenure. Speaks well for him, although overall it's not a pretty picture of his tenure.
- oldmanjay 10y agoIn the nerd community in particular, there is so much wishful thinking that Microsoft will fail that some people actually believe Microsoft is and has been failing. It's fairly amusing given the reality.
- r00fus 10y agoLots of MSFT folks mention that some of the internal changes happened before Ballmer transitioned out.
- sumitgt 10y agoYou might also want to consider the long period between (August 2013) where it was announced that Ballmer will leave v/s when he eventually left (February 2014).
- apapli 10y agoThere are a few comments on this thread about people disputing microsofts cloud revenues. I've got no extra intel or inside knowledge, however what I am seeing in the market suggests to me MSFTs cloud numbers are probably near to what they claim. I lead sales and marketing at a small Microsoft partner. Even though we are an edge case we haven't lost a deal against salesforce.com for quite a while, and I am hearing similar reports from other established Microsoft partners here in Australia. The combination of Dynamics CRM Online / Dynamics365 with the broader stack (BI, office365, azure) is extremely compelling to businesses. And at a third of the price of salesforce licensing all we needed to have done was equal them to win the deals. As Microsoft goes up look out for salesforce going down. They did a great job and set the gold standard, but the market has caught up and overtaken them now.
- mrebus 10y agoI've been trying to find Microsoft azure sales for years. As it is cool tech but could never figure out is it was actually selling. This report is no better in its obfuscation. First they state 12bil annualized run rate, ie they made 1 billion in june their best month. then they say "we are on track to achieve $20 billion in commercial cloud annualized revenue run rate in fiscal year 2018.". why not say actual revenue but that's just me. but the kicker is I suspect that a large chunk of this revenue is office 365. and can office 365 really be considered new revenue source and not just a migration from other office sales.
- apapli 10y agoI'd say it's both a new revenue source and migration. But what is wrong about that?
- Zigurd 10y agoI would expect this, and I would expect this trend to continue for several years. Almost every Windows server running in a corporate machine room or departmental closet should be an instance in the Azure Cloud. Microsoft will be delivering extra value by providing the hardware and taking responsibility for running these systems, and will generate recurring revenue for as long as the customer needs what's on those servers. This is a gold mine Microsoft can dig for many years.
- cerved 10y agoA lot of people seem confused at why an earnings boost in cloud revenues at the expense of traditional licensing revenues would result in positive market response. But you have to remember, there's a whole lot more to an earnings report than the sum of all the numbers in the balance sheet. Even more important is the story they tell. In the last few years, IT has seen growth in new business lines such as SaaS, cloud etc. and a growth stall n traditional revenue (HW, on-prem & licenses etc.) Older companies like Microsoft, IBM, Oracle have been making their bread and butter for decades in traditional technologies whilst new upstart companies like Salesforce, Amazon & Google have all established themselves as leaders within newer fields. In a sector where being an early winner within new technologies is key for future revenue (like Microsoft & Windows in the 90's) the market is judging these older giants not at the revenue they bring in, but in their ability to retain market share and beat new players in the innovation game. The boost in share price should be seen as a recovery from previous depreciation of share price (Nokia & Windows phone anyone?) and a belief the company has finally woken up to reality and is moving in the right direction.
- user5994461 10y agoWho used Azure here? What's your thoughts about it?