Cloud, Windows 10 to anchor Microsoft earnings – USA TODAY
SAN FRANCISCO â Microsoft continues its turnaround under CEO Satya Nadella, pushing deeper into cloud- and mobile-first technology as it breaks away from a decades-long reliance on license-generating software.
Analysts expect to see ample evidence of that continuing mission when the Redmond, Wash-based company (MSFT)Â releases first-quarter results Thursday, anticipated to be earnings per share of 58 cents on $20.96 billion in revenue, according to Thomson Reuters.
Of particular interest will be news related to adoption of the companyâs new Windows 10 operating systems, considered the foundation of Microsoftâs strategy to build a robust consumer base to which it call sell its Azure cloud service.
âI suspect the quarter will be ho-hum with a continued weak PC (sales) market, but at this point Microsoft can continue to be conservative on outlook and still not spook investors,â says Daniel Ives of FBR Capital Markets. âTheyâre still in a transition period, and Nadella still has runway.â
Cole Wilcox, CEO of asset management company Longboard, says heâs focused on how Microsoft is faring with its Office365 subscriber base, something he says is integral to any longterm success.
âMicrosoft may look at itself as a service provider with its cloud-first approach, but the point of entry is Office365,â says Wilcox. âAmazon tookÂ an early (cloud) lead with Amazon Web Services, but the plumbing of most global businesses run on Microsoft. In five years, Microsoft will be the worldâs most dominant cloud platform.â
Nadella certainly has been aggressive of late when it comes to making overtures to partners that once were rivals, all in an effort to make sure his company remains a vital player in enterprise.
The CEO sent an emissary to Appleâs Worldwide Developers Conference in September to tout how Microsoftâs suite of Office products worked seamlessly on Appleâs new iPad Pro. Not long after, he appeared at Salesforceâs big conference Dreamforce, demonstrating how Surface tablets can identify users via facial recognition. And just this week he appeared alongside Michael Dell to announce new offerings meant to drive Dell customers to Azure.
âMicrosoft remains a shining light in a dark, cloudy environment of large-cap tech,â says Ives, noting that the companyâs annualized commercial cloud run-rate is in excess of $8 billion. But, he adds, âto complete the companyâs full transition, they have to find success on the consumer side.â
Here, again, Microsoft hasnât been sitting idle. The company recently announced a new suite of Lumia phones (notable after its embarrassing write-down of anÂ ill-fated Nokia purchase) as well as upgrades to its Surface tablet. Even more enticing are suggestions that future Microsoft phones could essentially double as cloud-connected laptops, requiring only connections to external keyboards and monitors to make the transition to fully-functional work devices.
âThe revenue (from such hardware) doesnât matter as much as the brand-awareness they can potentially generate for Windows 10 and Office,â says Ives. âIn the sense, their success in enterprise could then spread to into the consumerâs living room. So they may try and woo you with hardware, but the magic trick is Windows 10.â
Colin Gillis of BGC Partners is already looking beyond Thursdayâs earnings call to the one that will take place in three months. âThe holiday quarter is what Iâm really curious about, because lastÂ year they got a big boost from hardware,â he says.
For the moment, however, heâs bullish on Nadellaâs ability to continue to guide Microsoft away from its legacy business and toward a new paradigm. âWhen youâve got a rotation in a business model youâre bound to get hiccups on any quarter,â he says. âBut as had been said about Microsoft these days,Â theyâre not strategically confused.â
Follow USA TODAY tech reporter Marco della Cava on Twitter @marcodellacava.