Microsoft's week involved strong earnings powered by strong Windows 7 and Office 2010 sales. News from its PDC Conference also dominated.
Microsoft had positive news this week, as it reported strong
results for its first fiscal quarter of 2011 and
solid sales of Windows 7. The company's revenues of $16.20 billion
represented a 25 percent rise over the same quarter last year, when businesses
and consumers kept their wallets firmly shut in the wake of the global
sales of Windows 7, Office 2010 and other flagship products
Microsoft's fundamentals are sound, although questions remain about the
ultimate financial viability of the company's "all in" cloud strategy. Net
income increased year-over-year by 51 percent, and all business segments
apparently enjoyed growth. Some 240 million Windows 7 licenses have sold to
date, according to Microsoft.
And in news that should surprise exactly nobody, "Halo:
Reach" sold pretty well.
"This was an exceptional quarter, combining solid enterprise
growth and continued strong consumer demand for Office 2010, Windows 7 and
Xbox 360 consoles and games," Microsoft CFO Peter Klein wrote in an Oct. 28
statement released ahead of the earnings call.
Although Microsoft's cloud-centric products have yet to
generate substantial cash-flow in the spirit of a Windows 7, there were some
positive signs for the company's online initiatives: online advertising grew 13
percent, and Bing's market share continues to increase. Within a quarter or
two, it will be more readily apparent how Microsoft's search-and-advertising
deal with Yahoo, which involves Bing powering the latter's backend search, will
play out on Redmond's balance sheet.
Microsoft executives insisted that businesses were continuing
their PC refresh cycle. "We are seeing improved business demand and adoption,"
Microsoft COO Kevin Turner wrote in an Oct. 28 statement.
earnings came just as the company kicked off its Professional Developers
Conference (PDC) 2010 in Redmond
, which again highlighted its executives'
intention to move with all due speed into the cloud. Amitabh Srivastava, senior
vice president of Microsoft's Server and Cloud Division, told eWEEK that
developers would play a key role in those initiatives.
"The further we got into this journey into the cloud, we saw
that more and more people were writing cloud applications in Java," Srivastava
said. "There are three things we need to do. One is tooling; we're going to
make the whole Eclipse integration with Azure be first class. Second is we're
going to expose the APIs in Windows Azure in Java. And third we're investing in
optimizing the performance of Java applications on Windows Azure."
Microsoft CEO Steve Ballmer highlighted Microsoft's
overarching strategy for cloud apps and a platform that incorporates not only
PCs and the cloud, but also mobile devices.
"Microsoft is combining the power and reach of the cloud
with both Web and local device experiences," Ballmer wrote in an Oct. 28
statement. "There has never been a better time for developers to bet on
The company used the pulpit of the PDC to announce two new
features for Windows Azure: Windows Azure Virtual Machine Role, which allows an
instance of Windows Server 2008 R2 to run in the company's cloud, and Server
Application Virtualization, which allows for the transfer of application images
to Windows Azure. That comes in addition to several new Azure services for
developers, including the Windows Azure AppFabric Composition Model, and the
Windows Azure Marketplace.
Meanwhile, Ballmer also used the PDC to tout Windows Phone
7, Microsoft's new smartphone platform-and to suggest it has a chance of
succeeding within the evolving mobile market.
"I think we kind of nailed it. When you see it, you just go
-oooh'," he told an audience during an Oct. 28 speech, according to
. "Make no mistake about it, we're all in."
In a contrast to the grid-like pages of individual apps that
define both the Apple iPhone and Google Android user interfaces, Windows Phone
7 aggregates content into six subject-specific "Hubs," such as "People" or
"Games." For the past several months, Microsoft has been encouraging developers
to build apps for the Windows Phone Marketplace, recognizing that a key part of
Windows Phone 7's success will be an app ecosystem capable of challenging
Apple's and Google's offerings.
Some 1,000 apps have reportedly been built for the Windows
Phone 7 platform, including some from marquee names like Twitter and eBay, but
overall that lags far behind Google's and Apple's app stores, which contain
hundreds of thousands of apps.
"We need your best work," Ballmer told developers at the
PDC, according to the Associated Press.
Earlier this week, departing Chief Software Architect Ray
Ozzie suggested in a blog posting
that cloud and mobile, together, would
ultimately decide Microsoft's fate.
"Certain of our competitors' products and their rapid
advancement and refinement of new usage scenarios have been quite noteworthy,"
he wrote. "Our early and clear vision notwithstanding, their execution has
surpassed our own in mobile experiences, in seamless fusion of hardware and
software and services, and in social networking and myriad new forms of
Internet-centric social interaction."
Translation: Microsoft's mobile initiatives need to match
Google and Apple.
"Organizations worldwide, in every industry, are now
stepping back and re-thinking the basics," Ozzie continued in his posting.
"Doing so is necessary for their long-term growth and survival. And our own
industry is no exception, where we must question our most fundamental
assumptions about infrastructure and apps."
The future, as Ozzie sees it, involves "continuous services"
connected to the cloud through "connected devices" available in a "breathtaking
number of shapes and sizes, tuned for a broad variety of communications,
creation and consumption tasks." In other words, the
"PC-centric/server-centric" model, which
helped elevate Windows and Microsoft top the top of the tech heap, is rapidly
giving way to a new paradigm
Whether Ozzie proves correct, and whether Microsoft can
execute a cloud and mobile strategy that leverages that future, will help
determine the company's balance sheet for years to come.