Company / division: Surface
Images Leak of New Microsoft Surface Pro (May 19, 2017)
For The First Time, Apple Drops Below Microsoft In J.D. Power’s Tablet Survey – Fast Company (Apr 7, 2017)
This is symbolically hugely important, because these are just the kind of stats that Apple likes to roll out on earnings calls and so on to highlights the strength of its products, far more so than market share or other statistics (though it often focused on percentage satisfaction rather than rankings per se). As the article makes clear, though, even though this is the first time Apple has dropped behind Microsoft, it’s not the first time it’s been beaten, as Samsung did so earlier. As is often the case with these rankings, you end up wishing the data were a little more transparent. For example, Microsoft apparently beat the iPad on Internet connectivity despite the fact that iPads offer 4G LTE as well as WiFi, which makes me wonder to what extent the ratings reflect the expectations people have of particular brands. In other words, are people pleasantly surprised that the Surface does certain things well, whereas others would expect the iPad to do those things well and therefore give it lower scores? Adjusting for those expectations would be tough, and I doubt JD Power does so. I also wonder to what extent Surface owners self-select into a much more narrow set of use cases for which the Surface is uniquely well suited, whereas the iPad is more of a general purpose device used by a far wider range of use cases, not all of which by definition it’s designed for. At any rate, it’s worth keeping an eye on this over time. Some of the other commentary in the article here is a little overblown – one thing is for certain: iPads massively outsell Surface computers of all shapes and sizes, so any idea that Surfaces are somehow displacing iPads in large numbers is nonsense.
via Fast Company
Cloud was the big theme on Microsoft’s earnings call once again, with a $14 billion annual run rate and nearly 50% gross margins across its cloud businesses, and a 95% growth rate in the Azure business alone. Surface revenue was down a bit, predictably because the product line wasn’t refreshed as fully as in previous years, but not by much, and it seems commercial sales actually grew (probably a reflection of the long sales cycles in enterprise). The phone business continues to dwindle to nothing (just over $200m in revenue this quarter by my estimate, down 81% year on year), but that’s so small now it barely impacts results. Windows did well overall, with some revenue growth from slightly stronger shipments in the PC market, though the PC market overall was still down overall last quarter. Monetizing its consumer business continues to be one of Microsoft’s biggest challenges – its Office consumer subscribers appear to be plateauing at around 25 million, most of its other consumer apps are offered free, and gaming is performing decently, though overall gaming revenue was down year on year. Overall, the results feed the narrative that Microsoft is undergoing a comeback, though it’s a slow and subtle one from a financial perspective.
You might also be interested in the Microsoft Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service.
Gartner Says 2016 Marked Fifth Consecutive Year of Worldwide PC Shipment Decline – Gartner (Jan 11, 2017)
This is Gartner’s quarterly press release on PC shipments for the end of 2016 (IDC’s equivalent release is here, with slightly different numbers, and definitions). The thrust is that the PC market continues to decline, with a 6.2% drop for the full year, and a more modest 3.7% decline in Q4 alone. But the other thing worth noting is that there’s a stark difference between the performance of the big players and the rest – the top six grew by 1.4% and the top five by 2%, but everyone but the top six collectively declined by 18.8% over the full year. The big players are mostly doing OK, but at the expense of a plethora of smaller players, and this is the shape of things to come, with the big question being the number of “big” players that will be able to sustain this performance – Asus and Acer saw declines in Q4, while Apple did better thanks to the new MacBooks.
Warm Takes on Microsoft’s Surface Pro 4 – Medium (Dec 27, 2016)
Part of the recent version of the Apple is Doomed narrative has Microsoft in the ascendant, ready to eat its lunch. As with the rest of the narrative, that’s overblown, and this piece does a nice job of highlighting the challenges for Microsoft in winning over Mac users. It’s also a good entry in another couple of narratives – Hardware is Hard, and Microsoft and Hardware, pouring some cold water on the plaudits for Microsoft’s recent hardware efforts.