Enterprise

Microsoft shows solid first quarter with Nadella in the driver’s seat

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Looks like everything is just fine at Microsoft with Satya Nadella at the helm.

According to today’s earnings statement, the tech giant brought in $20.4 billion in revenue last quarter, just above analysts’ predictions of $20.39 billion and slightly down from $20.48 billion year over year.

It registered $5.66 billion in net income last quarter, down from $6.05 billion for that quarter one year earlier. That means 68 cents per share in earnings, beating analysts’ estimates of 63 cents per share.

Bright spots include a doubling of cloud services revenue, with commercial-grade Office 365 leading the way.

It’s a good start for Nadella, who was appointed in February. And there’s room for improvement.

The company is now investing in “building and running cloud-based services in ways that unleash new experiences and opportunities for businesses and individuals,” Microsoft said. (If you want proof, check out Microsoft’s Iowa data center expansion from last week.)

Microsoft also is investing in the development of new ways to consume Microsoft stuff through touch, gesture, and speech. It’s also exploring the use of machine learning to make its services more intuitive and bringing Windows to more kinds of devices and to the cloud.

But as for last quarter, Microsoft took huge leaps forward. And the advancement began with Nadella’s appointment.

“This business of ours is exciting because it doesn’t respect tradition, what we’ve done in the past,” he said in the first remarks he made after the announcement. In effect, from the beginning he was playing the I’m-going-to-do-this-differently card.

Actually, for years, Nadella has been inclined to do things his own way. But now, the longtime Microsoft employee is chief executive, so his approach could make a wider impact — if he can stick to it.

He wants Microsoft to assume that this is a world that depends on the cloud first and supports mobile devices first, where it’s easy to port desktop applications to mobile devices and have clear visibility into all your cloud infrastructure.

And in this cloud-first, mobile-first world Nadella talks about, you’ve got to have freakin’ Microsoft Office software running on Apple’s iPad devices. iPad sales might be declining, but the devices are still popular. So finally, last quarter Nadella announced the release of Office for iPad, which almost immediately saw rapid adoption.

In the public cloud game, too, Microsoft came on strong, cutting prices not once but twice and staying on pace with public cloud market leader Amazon Web Services. That’s important in the competitive, rapidly evolving cloud market.

Microsoft even made clever open-source moves. Instead of hoarding the designs for the servers that power Microsoft’s public cloud, the company decided to contribute those designs to the Open Compute Project, allowing others to pore over the specifications. That doesn’t seem like something the old Microsoft would do. And yet it happened.

With Nadella leading the way, we can reasonably expect other gutsy moves from Microsoft in the coming years.

But at least in this quarter, he didn’t blow it. People haven’t given up hope that he’ll be able to steer the company in a better direction, and the rise of Microsoft stock last quarter appears to reflect that.

More about the companies and people from this article:

Microsoft Corporation is a public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through ... read more »

Microsoft Azure is a cloud computing platform and infrastructure, created by Microsoft, for building, deploying and managing applications and services through a global network of Microsoft-managed datacenters. It provides both platform... read more »

Satya Nadella is Chief Executive Officer of Microsoft. Before being named CEO in February 2014, Nadella held leadership roles in both enterprise and consumer businesses across the company. Joining Microsoft in 1992, he quickly becam... read more »

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