What Microsoft's new financial structure says about the company's future
Microsoft unveiled its new financial reporting structure at a meeting for financial analysts today. Instead of being based around products, it's based around types of revenue -- hardware, subscription, and software licensing.
The change highlights how Microsoft wants Wall Street to view it as a single company with different types of businesses rather than factional product groups that often competed against one another. It also shows how far Microsoft has to go before its newer business types -- hardware and subscription services -- catch up to its massive traditional software licensing business.
For the last eleven years, Microsoft has reported revenue and operating profit by product group. There were seven groups for a while; those were consolidated into five back in 2005. With some variations, the breakdown was basically:
- Business: Office and business tools like Exchange and SharePoint
- Server & Tools: Infrastructure software like Windows Server and SQL Server
- Home & Entertainment: Xbox and mobile software
- Online: Bing and MSN
The new divisions were laid out in a pair of slides at the FAM. The first one shows which product lines fall into each group:
The second slide laid out revenue and operating margin in each segment for fiscal year 2013 (which ended June 30), and the previous fiscal year:
This clearly shows how much of Microsoft's current revenue is dependent on big companies buying its products, often on multiyear license agreements. About 50% of Microsoft's revenue and 63% of its operating margin comes from this source.
Subscription enterprise products like Azure and Office 365 have been lumped in with Microsoft's consulting business -- which, last I checked, was running more than $1 billion per year in revenue -- in the Other Commecial category so it'll be a little hard to tell exactly how well they're doing. But that entire group accounts for only about $5 billion in revenue and less than $1 billion in profit.
But it's hardware that shows the harshest reality. Microsoft had revenue of less than $6 billion from hardware last year. By way of comparison, Apple's hardware revenue totaled more than $35 billion. Last quarter.
Because the new design in iOS 7 is so simple, designers have to be much more careful about how they lay out the app, according to the VP of product design and collaboration and file-sharing company Huddle.
The leader of JAMF, which helps enterprises manage Macs and iOS devices, says Apple is absolutely serious about the enterprise, even if they don't talk about it.
With its Bluetooth-based iBeacons turned on in all its U.S. stores, Apple is both attempting to improve customer experience and demonstrate its new location-based notification service. While retail is a natural fit for iBeacons, the teachnology has potential well beyond the store or mall. Here are ten other industries and spaces where iBeacons could deliver killer value.
BlackBerry has a lot of hurdles to cross to stage a comeback but one in particular might be especially tough to overcome: the operators. My experience getting started with the Z10 shows AT&T, at least, doesn't seem to find the Z10 a priority.