Dear Friends,

Microsoft® surprised many analysts by reporting better than expected earnings for the fourth quarter of their 2015 fiscal year, although expectations were rather conservative due to sluggish PC sales and conservative guidance from the company. The software giant reported revenue of $22.2 billion, compared with $23.38 billion from the same quarter a year ago. Diluted Earnings-Per-Share were 62 cents, compared to 55 cents a year ago. Analysts were expecting EPS of 58 cents and revenue of $22.04 billion. 

 

Unfortunately, the fiscal results will be recorded as Microsoft’s largest loss ever as the company wrote off $7.6 billion from its Nokia acquisition and restructuring costs after eliminating 7800 jobs, most of which were related to Nokia.

 

It’s worth noting that as customers transition from perpetual licenses for Office to Office 365, which is a cloud based subscription, revenue must be reported throughout the course of the subscription, rather than upfront as was the case with perpetual Office sales. Microsoft believes the long term result will be more revenue per customer, although it may appear as a short term decline.

 

News

Microsoft’s 4th Quarter FY 2015 Earnings Analysis- Licensing

07.22.2015

By: Daryl Ullman

Microsoft reports revenue by "Devices and Consumer" and "Commercial" divisions, and reports in the following six segments.

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Windows® 10 Release and Updates

Whether you're following trade publications or mainstream news media it's hard to escape news about Windows® 10 this month. The widely publicized release date of July 29 will mark the beginning of a phased roll-out which will likely last a few days to satisfy initial demand. The first to receive the new operating system will be Windows Insiders, followed by those who reserved their copy online during recent weeks. Those who reserved their copy online should receive the following email:

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Microsoft® Product Terms

On July 1, Microsoft® finally combined the Product Use Rights (PUR) and Product List into a single document. The newly published "Product Terms" document is intended to offer "fewer steps and one location to find what you need". This comes as a welcome change for most. In the past, there was often uncertainty as to which document contained the relevant information people were seeking.

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Windows® 10 Support Clarified (?)

As the July 29th Windows® 10 release date approaches we are learning more about the near term and long term update and support plans. Some reports from Microsoft® bring much needed clarification to certain topics, while others seem to confuse us even more than before.

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Microsoft® Enterprise Price Increases

We have known for months that Microsoft® would increase the price of most on-premises User CALs on August 1, so the upcoming 13% price hike comes as no surprise. The last time Microsoft increased their User CAL pricing was December, 2012 so one might argue they are due, but some have speculated that this increase is intended to make on-premises hosting less attractive in an effort to move more enterprise customers to the cloud.

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Introducing Office 365™ E5

One of the advantages (and disadvantages according to some) of cloud based software is that it can be constantly updated, whether to add functionality, improve security, or for performance fixes and enhancements. Of course Microsoft® isn't going to add significant functionality without increasing the price so we should expect changes to the way in which they bundle their products as well. The latest such change was revealed last week when they announced that Office 365™ E4 will soon be replaced by an E5 bundle. As with E4, E5 will be the most all-inclusive Office 365 suite and will include every piece of functionality available.

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The Oracle™ Cloud is Growing

I recently posted a blog about Oracle's™ need to expand their business model from an on-premises database provider to a cloud computing host. Last week the company announced disappointing earnings and the details behind them further validate the need to make a change.

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Important
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