When Microsoft announced Q2 financial results today, the two-part song remained the same: Demand for the company’s business applications — Exchange, SharePoint, Lync and Dynamics CRM — continues to accelerate, while sales of Windows sank 6 percent. CEO Steve Ballmer is calling for patience as Microsoft prepares Windows 8 for delivery sometime in 2012. But The VAR Guy is starting to wonder: Can Windows 8 really energize Microsoft and its partner community?
Of course, it’s important to keep the big picture in perspective: Microsoft delivered record quarterly results of $20.89 billion for its Q2 ended Dec. 31, 2011. And earnings beat analyst expectations.
Celebrating Server Apps
It sounds like Microsoft’s bread-and-butter business applications continue to thrive. Revenues from Exchange and SharePoint jumped 10 percent, while revenues from Lync and Dynamics CRM grew by more than 30 percent. Those are impressive stats, especially since Microsoft faces such fierce competition from Oracle, Salesforce.com, SAP and other big-name business-centric companies.
Still, Microsoft and its channel partners can’t hide from a challenging reality: The Windows and Windows Live division saw sales slip 6 percent to $4.74 billion. Ouch. Microsoft blamed the decline on a “soft PC market” and “continuing economic uncertainty in key parts of the world.”
Analyzing Microsoft’s Claims
Ahem, The VAR Guy’s reality check: Microsoft currently lacks a strong response to Apple iOS (iPads and iPhones) and Google Android in the market, and some folks are shifting a portion of their IT budgets from Windows PCs to tablets and smart phones.
In theory, Windows 8 could get Microsoft back on track. But the effort will require far more than a strong Microsoft operating system. Microsoft must also ensure that Windows 8 has a strong app store component, backed by strong ISV enthusiasm.
Meanwhile, Microsoft’s cloud strategy seems to be delivering mixed news. Just yesterday, Microsoft said JetBlue embraced Office 365, the software giant’s SaaS platform for Exchange Online, SharePoint Online and more. And a Microsoft spokeswoman says Microsoft now has 42,000 cloud partners worldwide, up from 16,000 at this time last year.
But here’s the rub: Are those 42,000 cloud partners generating substantial revenues for Microsoft? So far the answer is elusive. Microsoft did not mention Office 365, Windows Azure or cloud computing in its earnings release today. But the Office 365 effort is part of Microsoft’s Business Division. Perhaps some of those Lync, Exchange, SharePoint and Dynamics CRM wins involve the cloud. But so far The VAR Guy can’t say for sure…
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The global economy forecasts still looks pretty grim and that will continue to hurt Microsoft more than many others.
Gizmodo and Engadget put some salt in the wounds adressing the “Ultrabook concept”
http://gizmodo.com/5875845/theres-no-such-thing-as-an-ultrabook
http://www.engadget.com/2012/01/19/editorial-dont-call-it-an-ultrabook/
Perhaps not that important, but it indicates that Ultrabooks might not be the answer to the decline. Shure, when Windows laptops are replaced it is more than likely that it will be a Ultrabook than the heavier machinery of today.
But that’s really a internal shift and doesn’t really create growth. Apart from lighter and/or extended time on battery – can the user do more – or more efficient?
From the available test version of W8 I do not really see how W8 contributes that heavily either.
Will Ultrabooks with W8 keep users from moving to Apple? Probably to a certain extent, but then again – maybe not so much.
Wrt smartmos Nielsen reported a minor (0,1%) increase at the end of 2011. That’s a far cry from what should have been expected. Mind you, these figs are not verified by the other market researchers yet, but Microsoft are betting rather heavily on WP thus no particular mention in the report is not a good sign by any standard.
Meanwhile, Google reported 250 mill Androids sold and 700 000 activated each day, and Samsung has cornered 25% of all Korean users with Galaxy II.
Apple showed off a really really good iBook (education) concept just now. I’m fairly sure that the concept will keep Android at distanse and Microsoft beyond the horizon.
“Microsoft must also ensure that Windows 8 has a strong app store component, backed by strong ISV enthusiasm.”
Microsoft has stated than any Windows 8 Metro app will only be available and can only be downloaded from the Microsoft App Store.
Where does this app store strategy leaves VARs? Out in the cold, if you ask me.
Michael,
On the one hand, that app store strategy could leave VARs and partners out in the cold. But on the other hand: What if VARs offered integration services that tied together some of the apps? That trend has started (albeit in a small way) in the Google Apps marketplace…
-TVG
“But here’s the rub: Are those 42,000 cloud partners generating substantial revenues for Microsoft? So far the answer is elusive.”
My guess is that those cloud partners are generating much revenue at all. I don’t think so just based on discussions with many many providers. Second a couple of conferences were a room full of partners will raise their hands that they have signed up to be an MS cloud partner, but then asked have you generated any revenue and all but a few hands go down.
There are a lot of reasons for that I think. I’ve only had a chance to talk one on one with a limited number of partners when networking, but everyone that I have spoken with has said that the Microsoft program is a very difficult one to work with. And that has been my personal experience. In fact, I was sure I was missing something because the MS cloud product was a hard sell to prospects. But asking around, I don’t think there are many partner producing much revenue.
Yours truly,
Business Computer Network Consultant
[...] Microsoft Business Applications Rise As Windows Revenues Slip 6% [...]
[...] Within the next year or two, Roskill predicts, the world will wake up to realize that Microsoft has serious momentum because it has “cloudified” applications like Exchange, SharePoint, Lync, and Dynamics. “They’re all doing extremely well,” said Roskill — and Microsoft’s financial results back up that claim. [...]