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Microsoft Cloud Growth Drives Strong Fourth-Quarter Results

77 points by theatraine 12y ago

ChuckMcM 12y ago
Pretty nice, ouch on the $733M fine by the EU. This bit was what I'm watching: > Bing search advertising revenue grew 40%, and U.S. > search share grew to 19.2%. 40% growth on Search Advertising revenue against a 23% gain on 'sites revenue' for Google. I wish Microsoft would break out their CPC numbers but expect that is a bit much to ask.
- parag_c_mehta 12y ago
  You got to remember Bing is coming off a much smaller base. I don't see grand plans with Bing, as oppose to google. For eg, Google envisioned Adwords and worked on "free" google analytics. This way they have very wide penetration in web sites market and they know each individual user behaviour which can then be marketed based on their interests.
  - Encosia 12y ago
    I don't know where they're getting those numbers, but nearly 20% search share is nothing to sneeze at if it's true.
    - joelrunyon 12y ago
      Does this include the earnings they get from powering Yahoo?
- icantthinkofone 12y ago
  I'm not somewhere I can check this but, last I looked, Microsoft loses a billion dollars a year on Bing. So a 40% revenue growth means they just wouldn't be losing as much.
  - cnaut 12y ago
    This is the not the case anymore. A lot of the early loses were necessary investments to establish the infrastructure needed to compete with google in search.
    - icantthinkofone 12y ago
      I'm not talking "early losses". Microsoft lost $1 billion every year on Bing until at least two years ago. Compare that to Google profiting billions every year and you can see Bing is no Google.
      - ChuckMcM 12y ago
        Like you, I had similar information and I've tried a couple of different paths to figure out what the current state of affairs is. There are some Microsofties reading this, feel free to let me know off line (I'll keep your confidence) whether or not these gains are being translated into bottom line improvements yet.
      - cnaut 12y ago
        Since Bing is only 5 years old, I would consider losses 2 years ago to still be early. Also, reported numbers were usually on Microsoft Online Services Division as a whole which included other money losing businesses like MSN
sirkneeland 12y ago
Good for them. The Microsoft Mobile division (formerly Nokia Devices & Services) lost $700 million. How much of that is one-time charges related to the ownership change and how much is the continued decline of unit sales?
pmalynin 12y ago
"Strong" means 7% less than last year. Source: BBC Business
- outside1234 12y ago
  That's the total number, which includes the Nokia results. Both Office 365 and Azure grew at 100+% y/y growth rates per the release above.
  - higherpurpose 12y ago
    But lost profits, which means Microsoft is most likely cannibalizing its traditional Office business with the 365 one, so the "growth" for 365 is pretty misleading, if it's just converting traditional Office customers to 365 ones.
    - outside1234 12y ago
      probably, but Office365 is a much better business. its much more sticky.
- sz4kerto 12y ago
  Yes, GAAP EPS is(7%), mostly because the Nokia acquisition and the EU fine. That means that their core businesses grew, that can be considered strong as many were expecting a dying PC business. Their operating income increased by 7%. That's why analysts see this as a strong quarter (considering they've been dead for a while ... /s). It's good to keep in mind that they're not really a startup and they're squeezed in almost all areas, so approximately maintaining revenue and income is all right.
  - tdicola 12y ago
    I wonder how much of the growth is just a transient bump from businesses dumping the last of the XP machines.
    - 12y ago
xamlhacker 12y ago
Lumia device sales for the period of April 26 to June 30 was 5.8m. Doing a simple extrapolation to full 3 months gives an estimate of 8m Lumia smartphones in the quarter.
jasonkolb 12y ago
This is a one-time hit. They're now enforcing licensing very strictly where they didn't before and offering "nicer" terms if they buy some Azure instead of paying those costs retroactively. It'll only work once, and will create a lot of bad karma.
- bignaj 12y ago
  What exactly is your source and/or position of expertise here? Sounds like a lot of speculation and/or FUD. I was interested in this, but couldn't find any sources to back up your statements.
  - spydum 12y ago
    Can confirm: big enterprise shops all over have had a serious tightening of SQL Server licenses, as well as other product suites, with major incentives for moving workloads to Azure. However, I don't know if this is a one time deal: it may grease the wheels on a lot of enterprise shops willingness to "Trust the cloud".
  - nick_riviera 12y ago
    Confirmed here as well. Just had an audit smackdown. Problem is you never know you're in compliance or not due to various usage policies of MSDN licenses etc for internal use and the definition of internal use changes depending on how much they want you to pay. Also SQL2012 licenses cost us a fair whack due to the logical vs core licensing changes.
  - louthy 12y ago
    Also confirmed: MS are trying to squeeze us on SQL Server costs. So we're looking to switch away from SQL Server. Thanks for the headache MS.
    - yuhong 12y ago
      I know: http://www.crn.com/news/cloud/300072551/microsofts-enterprise-software-price-hikes-paying-off-as-sql-server-business-hits-5-billion-mark.htm http://www.crn.com/news/cloud/300072551/microsofts-enterpris...
nhebb 12y ago
> Office 365 Home and Personal subscribers totaled more than 5.6 million I'm surprised that's so low, especially considering that 1.1 billion people use Microsoft Office [1]. Given how hard Microsoft has been pushing Office 365, I'd've [2] thought the number of users would be far greater. [1] Source: http://www.microsoft.com/en-us/news/bythenumbers/index.html http://www.microsoft.com/en-us/news/bythenumbers/index.html [2] Fails spell check. Should be a word, imho.
- tkmcc 12y ago
  It does seem low, but Office 365 Home and Personal (not Business!) subscribers are buying it themselves rather than using licenses purchased for them by an organization. The vast majority of those 1.1 billion users are undoubtedly not personally paying for the software and are instead part of volume license deals.

77 points by theatraine 12y ago

Pretty nice, ouch on the $733M fine by the EU. This bit was what I'm watching: > Bing search advertising revenue grew 40%, and U.S. > search share grew to 19.2%. 40% growth on Search Advertising revenue against a 23% gain on 'sites revenue' for Google. I wish Microsoft would break out their CPC numbers but expect that is a bit much to ask.

parag_c_mehta 12y ago
You got to remember Bing is coming off a much smaller base. I don't see grand plans with Bing, as oppose to google. For eg, Google envisioned Adwords and worked on "free" google analytics. This way they have very wide penetration in web sites market and they know each individual user behaviour which can then be marketed based on their interests.
- Encosia 12y ago
  I don't know where they're getting those numbers, but nearly 20% search share is nothing to sneeze at if it's true.
  - joelrunyon 12y ago
    Does this include the earnings they get from powering Yahoo?
icantthinkofone 12y ago
I'm not somewhere I can check this but, last I looked, Microsoft loses a billion dollars a year on Bing. So a 40% revenue growth means they just wouldn't be losing as much.
- cnaut 12y ago
  This is the not the case anymore. A lot of the early loses were necessary investments to establish the infrastructure needed to compete with google in search.
  - icantthinkofone 12y ago
    I'm not talking "early losses". Microsoft lost $1 billion every year on Bing until at least two years ago. Compare that to Google profiting billions every year and you can see Bing is no Google.
    - ChuckMcM 12y ago
      Like you, I had similar information and I've tried a couple of different paths to figure out what the current state of affairs is. There are some Microsofties reading this, feel free to let me know off line (I'll keep your confidence) whether or not these gains are being translated into bottom line improvements yet.
    - cnaut 12y ago
      Since Bing is only 5 years old, I would consider losses 2 years ago to still be early. Also, reported numbers were usually on Microsoft Online Services Division as a whole which included other money losing businesses like MSN

sirkneeland 12y ago

Good for them. The Microsoft Mobile division (formerly Nokia Devices & Services) lost $700 million. How much of that is one-time charges related to the ownership change and how much is the continued decline of unit sales?

pmalynin 12y ago

"Strong" means 7% less than last year. Source: BBC Business

outside1234 12y ago
That's the total number, which includes the Nokia results. Both Office 365 and Azure grew at 100+% y/y growth rates per the release above.
- higherpurpose 12y ago
  But lost profits, which means Microsoft is most likely cannibalizing its traditional Office business with the 365 one, so the "growth" for 365 is pretty misleading, if it's just converting traditional Office customers to 365 ones.
  - outside1234 12y ago
    probably, but Office365 is a much better business. its much more sticky.
sz4kerto 12y ago
Yes, GAAP EPS is(7%), mostly because the Nokia acquisition and the EU fine. That means that their core businesses grew, that can be considered strong as many were expecting a dying PC business. Their operating income increased by 7%. That's why analysts see this as a strong quarter (considering they've been dead for a while ... /s). It's good to keep in mind that they're not really a startup and they're squeezed in almost all areas, so approximately maintaining revenue and income is all right.
- tdicola 12y ago
  I wonder how much of the growth is just a transient bump from businesses dumping the last of the XP machines.
  - 12y ago

xamlhacker 12y ago

Lumia device sales for the period of April 26 to June 30 was 5.8m. Doing a simple extrapolation to full 3 months gives an estimate of 8m Lumia smartphones in the quarter.

jasonkolb 12y ago

This is a one-time hit. They're now enforcing licensing very strictly where they didn't before and offering "nicer" terms if they buy some Azure instead of paying those costs retroactively. It'll only work once, and will create a lot of bad karma.

bignaj 12y ago
What exactly is your source and/or position of expertise here? Sounds like a lot of speculation and/or FUD. I was interested in this, but couldn't find any sources to back up your statements.
- spydum 12y ago
  Can confirm: big enterprise shops all over have had a serious tightening of SQL Server licenses, as well as other product suites, with major incentives for moving workloads to Azure. However, I don't know if this is a one time deal: it may grease the wheels on a lot of enterprise shops willingness to "Trust the cloud".
- nick_riviera 12y ago
  Confirmed here as well. Just had an audit smackdown. Problem is you never know you're in compliance or not due to various usage policies of MSDN licenses etc for internal use and the definition of internal use changes depending on how much they want you to pay. Also SQL2012 licenses cost us a fair whack due to the logical vs core licensing changes.
- louthy 12y ago
  Also confirmed: MS are trying to squeeze us on SQL Server costs. So we're looking to switch away from SQL Server. Thanks for the headache MS.
  - yuhong 12y ago
    I know: http://www.crn.com/news/cloud/300072551/microsofts-enterprise-software-price-hikes-paying-off-as-sql-server-business-hits-5-billion-mark.htm http://www.crn.com/news/cloud/300072551/microsofts-enterpris...

nhebb 12y ago

> Office 365 Home and Personal subscribers totaled more than 5.6 million I'm surprised that's so low, especially considering that 1.1 billion people use Microsoft Office [1]. Given how hard Microsoft has been pushing Office 365, I'd've [2] thought the number of users would be far greater. [1] Source: http://www.microsoft.com/en-us/news/bythenumbers/index.html http://www.microsoft.com/en-us/news/bythenumbers/index.html [2] Fails spell check. Should be a word, imho.

tkmcc 12y ago
It does seem low, but Office 365 Home and Personal (not Business!) subscribers are buying it themselves rather than using licenses purchased for them by an organization. The vast majority of those 1.1 billion users are undoubtedly not personally paying for the software and are instead part of volume license deals.