by Neil MacDonald | August 3, 2010 | Comments Off on Observations from Microsoft’s Financial Analyst Meeting
Last week, Microsoft held its annual financial analyst meeting. The materials presented are available at this link.
There are the things you would expect – like Microsoft talking about the success of Windows 7 and IE8.
There were a couple of areas that stood out:
1) Microsoft’s Chief Operating Officer, Kevin Turner, explained that Microsoft’s sales strategy was now to lead with the cloud — “cloud first”. In the past, Microsoft’s “software + services” messaging and even its hybrid on premises/Cloud messaging have been viewed as defensive and reactive. Microsoft will now position its cloud offerings first. That’s a pretty notable shift.
2) Microsoft’s Chief Financial Office laid out a compelling case for how and why Microsoft will increase revenue with its Cloud-based offerings (for example, by providing storage and compute as a service, Microsoft now gets a chunk of the spending that would have gone to on-premises IT hardware vendors and from which it hasn’t gotten revenue before). He didn’t directly address the issue of overall margin dilution as compared to the highly profitable Windows and Office businesses. Another example is selling to net new users (e.g. capturing Lotus Notes and Novell GroupWise migrations) with its Cloud-based offerings.
3) There was an impressive demonstration of a multi-device “personal cloud” (the first time I had heard Microsoft use this term) scenario transferring music and photos between a Windows Phone 7 device, a TV set top box, an Xbox console, an Onkyo stereo and a tablet/slate prototype device. Cool stuff and the logical evolution of Ray Ozzie’s Mesh technology / Windows Live Synch which sound far less interesting than a “personal cloud”.
4) Speaking of tablets, Steve Ballmer was clear that Microsoft would be a player in the tablet market, but was not clear on the details of which partners and in what timeframe. HP recently expanded its tablet work to include WebOS (with some reports indicating it might drop Windows) and Dell has its own Android-based device, so it is not clear which OEMs are preparing to deliver a Windows-powered tablet device. From what Steve said, I believe they will target Windows (or a variant of Windows) for the device – not Windows CE (the OS in the heart of the Zune and Windows Phone 7 devices). However, no specifics were announced. For Microsoft to slow the momentum of the iPad and other alternative-OS tablets, they should target this holiday season.
5) In addition to the personal cloud demo, Windows Phone 7 was highlighted multiple times. Another demonstration showed Bing on Windows Phone 7 using the location-awareness of the device to create context-aware searches.
6) There was a lot of interest in the Microsoft compute container that was on display outside of the meeting. Microsoft’s uses larger versions of these in its own data center and it enabled the Server and Tools Business Unit President, Bob Muglia, to talk more about Microsoft’s recent Windows Azure Platform Appliance (WAPA) announcement. WAPA is an odd name for the offering since Microsoft won’t build or sell the hardware. Instead, Microsoft sells the Azure service that “lights up” the hardware and Microsoft takes responsibility for the ongoing patching, software updates and so on under the covers. WAPA also helps from a security perspective by providing alternatives to keep data regionally local while still taking advantage of Cloud-based computing models.
7) Notably absent was any mention of “SilverLight” – I don’t recall hearing it mentioned once and it appeared only on one slide in regards to Windows Phone 7’s primary programming model. I believe this is because the business model for SilverLight is unproven (at least on non-Microsoft devices, browsers and platforms). For Microsoft devices such as Windows Phone 7, SilverLight provides a “just right” amount of .NET programming infrastructure to support next generation user interfaces with features such as multitouch. Still, odd it wasn’t mentioned in regards to its importance as an on-ramp to consume Microsoft-provided services in a heterogeneous, multi-device, multi-OS world.
Overall, I believe Microsoft made a solid case for how and why it will be relevant in the Cloud and how Microsoft has an opportunity to grow revenue here. Talking with financial analysts present, this was one of their big concerns. Others, such as Microsoft closing the gap with Apple in mobile/tablet and Google in search/mobile (future) as well as the overall margin dilution remain open concerns.
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