Friday, July 22, 2016

Short Microsoft FY 4Q16 Earnings and Hololens

I got a chance to talk about Microsoft following their FY 4Q16 earnings call on the CCTV America Global Business program.  I picked up on some highlights, one really positive and one negative. The short term positive story is that their cloud business is doing very well, specifically Azure. 

Azure has the most momentum of their reporting segments with the following points: 

  •  Eight straight quarters of triple digit revenue growth
  • A modified run rate of $12B in FY 2017. It was $10B in FY 2016, catching up to Amazon AWS (the industry leader). 
  • Projected $20B run rate by FY 2018. (No pressure on the Microsoft Azure sales force, right?) 

The other highlight, albeit negative (and may be inconsequential to the overall revenue picture) was that their handset business revenue dropped>70%. This wasn't a surprise as they've been on the march to unload their handset hardware business and 'rationalize' the associated workforce.  It's interesting as Microsoft's stated strategy is "Mobile First, Cloud First" in that order.  Traditionalists wonder if you have no handset to further the Windows 10 smartphone OS, how can the company really say Mobile First?  Of course they've moved office into smartphones on iOS and Android, embracing competitors but conceding to the reality that marketshare rules and they need to stay relevant there. I guess that small mobility component counts, right?  There are rumors that new smartphone hardware will come in 2017 but any longer will be a nail in the mobile Windows 10 OS's coffin.


Though CCTA Business America focused on the Hololens story in relation to the wildly popular Pokemon Go, the takeaway for me is that the Augmented Reality category has been embraced by the consumer. While the host, Rachelle Akuffo pointed out the similarities to the discontinued Google Glass, in restrospect similar but different animals.  Glass was kind of enabling computing and having that experience on the lens. It may be the stretch would be Oculus Rift, DayDream or any other AR/VR product they're working on.

To be fair, VR and AR are still in its infancy. If one looks at how Microsoft is positioning Hololens, the company is presenting more business and scientific (e.g., NASA) applicability rather than what we immediately think of as gaming.  It's an exciting area to watch.


Friday, July 8, 2016

Verizon's July Rate Plan Changes Really Threaten AT&T's High-Value Subscribers

The Verizon changes that became effective on July 7th were leaked many days ahead of the launch. The media's, bloggers' and mobile industry junkies' discussion and focus has been on price increases at the S, M, L XL and XXL bucket levels.  As with many carrier plan actions, the Verizon message is that there is much more data (in light of strong data consumption trends) for the new price points. The graphic below shows the plans - old on top and the new on bottom.

For industry watchers, it's clear that competitors Sprint and T-Mobile continue to enjoy price advantage. The logical conclusion is that Verizon has no chance to win back former customers or draw from Sprint and T-Mobile with this action.

What? A price increase? What's Verizon smoking? 

Rather, Verizon's plan move was to attack AT&T to gain high-value customers AND retain its own.  It's no secret that AT&T and Verizon has been very vocal about not playing for the 'price-sensitive' customers and has concentrated on customers who yield greater revenue per account.  This means the target segment is large data consumers, small and medium business accounts.

Within this July price action, the more interesting movement happens at the XL and greater data levels.  The bottom line here is that Verizon increased the data value gap and reduced price points against AT&T.

Let's break the action out into two chunks, the mid-range and the high-end.  In the mid-range where I suspect a lot of bread and butter family plan battling happens, Verizon wins.  Verizon was already winning at the $100 price point, providing 18GB whereas AT&T offered 15GB.  However, the new move presented a less expensive $90 - 16GB level.  The same story is at the next data contention area; the value gap is most pronounced against AT&T's $140-20GB plan.  With a lower $110-24GB combination, Verizon should win the AT&T switcher.

At the high-end, it's pretty apparent that Verizon has a dramatic price and data value gap and the upper hand in selling to data hungry consumers and business data pooling accounts.  Verizon wins dramatically in price as the same data levels.

What's next?  Given this discrepancy, AT&T needs to respond in some fashion or risk losing these high-value users.  Verizon should be turning up the marketing within business sales channels now that their sales reps are armed with pretty good products - messaging price - data value and network.