Microsoft’s 2Q Fiscal Earnings Show its Future Lies in the Data Center – Breaking Analysis

 

Microsoft released its second quarter fiscal year earnings for 2013 yesterday, showing revenue of $21.46 billion, and earnings per share of 76 cents. Including deferred revenue, the Windows division’s sales were $5.88 billion, up 24 percent. Wikibon Co-Founder and CTO David Floyer confirmed these were excellent numbers overall and noted how well-run Microsoft is.

Windows RT Still MIA

 

However, Floyer emphasized that there were many things omitted from Microsoft’s announcement. He acknowledged that Windows 8 is a good product for introducing touch, but it’s a good product for the existing customers.

“There was no evidence at all in the earnings announcement about if Windows Mobile or Windows RT was contributing in any significant way to this, to allow it to break out into the post-PC market,” he said. As far as the sales numbers on the Surface RT that Microsoft continues to keep shrouded in mystery, Floyer said, “It’s a nice piece of equipment and is a good way to get a very low cost version of Windows Office but . . . from a tablet point of view, it just doesn’t stack up.”

Time to Ditch Intel?

 

Feledy referenced a research piece written by Floyer which projected that Intel would struggle in the post-PC environment with mobile and tablets. When asked if Microsoft would be able to avoid the same problems, Floyer answered both yes and no. He gave his reasoning that they would be able to avoid the post-PC problems because their software is far more robust, and they have an existing set of customers they can continue to upgrade.

However, between Intel’s grim forecast in the declining PC market and ARM processors going through the roof, this directly affects Microsoft. In order to stay competitive and tap into the fastest growing market, Floyer recommended that Microsoft needs to move their Windows products to the ARM basis. He predicted that they will do just that, not in the immediate future, but possibly by 2017.

Change of Strategy: Focus on Enterprise

 

“The current strategy is Windows for everything,” Floyer declared. “I think that’s going to have to change long term.” He elaborated on that by suggesting that Microsoft’s strategy would be more effective if they disaggregated the company and made each of the divisions work on their own to try and make an impact in the post-PC market. He said Windows Office is an obvious product where they could attempt to implement that change.

Floyer praised the Windows server products and database products in the enterprise for their ten percent growth. He said, “That’s where the future of Microsoft lies, and they should focus on providing excellent products for the data center and not allow those products from the server division and from the Office division to be held back by the . . . poor showing of the Windows PC operating systems.”  See the entire segment with Kristin Feledy and David Floyer on the Morning NewsDesk Show.