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.