Narrative: Microsoft's Hardware Push

Each narrative page (like this) has a page describing and evaluating the narrative, followed by all the posts on the site tagged with that narrative. Scroll down beyond the introduction to see the posts.

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    ★ Microsoft Announces New Surface Pro, Custom Windows 10 for Chinese Government (May 23, 2017)

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    Images Leak of New Microsoft Surface Pro (May 19, 2017)

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    Apple Reportedly Updating MacBook Line at WWDC (May 16, 2017)

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    ★ Microsoft Unveils Surface Laptop, an Odd Mix of Power and Constraints (May 2, 2017)

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    ★ Microsoft Misses on Revenue as Hardware Weakness Partly Offsets Cloud Strength (Apr 27, 2017)

    Microsoft was one of numerous big tech companies that reported Q1 2017 financial results (its fiscal Q3 results) this afternoon, and the only one of the big three to miss on revenue. That revenue miss was largely due to a shortfall in hardware revenue as Surface had its first big year on year decline in a year and a half due to a lack of new mass market hardware, and phone revenue dropped to essentially zero. However, these two businesses together make up just 4% of Microsoft’s revenue, which continues to be dominated by software and to an increasing extent services, while growth is dominated by the move to the cloud. Microsoft’s cloud revenue run-rate is now at an annualized $15.2 billion, compared to Amazon’s $14.5 billion in actual annual revenue, though Microsoft’s definition of cloud here is far more expansive than Amazon’s. The productivity business had a particularly strong growth quarter at over 20%, while the Intelligent Cloud segment also improved a little to just over 10%. But margins continue to  fall overall as the newer cloud services generate less profit than Microsoft’s old massively profitable software business did, and that picture isn’t likely to change. Microsoft is growing again after both lapping the introduction of Windows 10 and the revenue deferral associated with the new business model, and also getting past the biggest drops in the phone business, but it’s mostly doing so by doubling down on enterprise products and services while its consumer and hardware businesses mostly continue to struggle to find growth.

    via Microsoft

    Microsoft Reveals Xbox Scorpio’s Impressive Specs – Kotaku (Apr 6, 2017)

    This is an interesting strategy for Microsoft, which is releasing specs but not many more details for the next generation Xbox, which is codenamed Scorpio. On paper at least, it’ll be more powerful than its major competitor, the Sony Playstation 4 Pro, in several departments, but the consensus among gaming blogs seems to be that what Xbox needs isn’t so much better hardware as better software, or in other words more compelling games. This is where the Sony console has taken the lead in the current generation, and where it continues to do quite a bit better than the Xbox for now. It’s possible that the better hardware might spark better games from developers keen to push the limits, but Microsoft will obviously have to work hard and directly to get more developers and more titles on board. For now, this spec release by itself does little to tell us how the next-generation Xbox will do.

    via Kotaku

    Microsoft FY17 Q2 (December 2016 quarter) Earnings – Microsoft (Jan 26, 2017)

    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.

    via Microsoft (more on Techmeme)

    The Verge 2016 tech report card: Microsoft – The Verge (Dec 29, 2016)

    This is a good summary of Microsoft’s 2016, which was the year in which a significant turnaround or even a comeback seemed to become plausible. The company made some big advances in key areas, although there was no real advance in first-party tablets or laptops, and it all but killed off its Lumia smartphone business. There’s lots of potential here, but we’ll see in 2017 both whether Microsoft can really turn around its consumer business, and whether it can make its hardware business grow again.

    via The Verge 2016 tech report card: Microsoft – The Verge

    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.

    via Warm Takes on Microsoft’s Surface Pro 4 – Medium