Microsoft Q1 Earnings: Windows Server, Dynamics Lead the Way
Microsoft‘s Q1 earnings, released today, met Wall Street’s expectations. One prime reason: Strong demand for Microsoft’s server offerings, including Lync, SharePoint, Exchange, Dynamics and Windows Server. In recent months, The VAR Guy has told channel partners to shift their Microsoft focus to the company’s business division, where sales growth remains surprisingly strong. Dynamics, in particular, enjoys growing momentum despite fierce competition from NetSuite, Salesforce.com, Oracle and SAP.
Here’s a piece-by-piece look at Microsoft’s Q1 results, and a reality check from The VAR Guy.
1. Dollars and Cents: Microsoft delivered record Q1 revenue of $17.37 billion, up 7 percent from Q1 2011. Net income rose 6 percent to $5.74 billion. The VAR Guy’s reality check: Skeptics still think Microsoft is dying. But Q1 net income was $5.74 billion, folks … with a B.
2. Business Division: Q1 revenues rose 8 percent to $5.62 billion, led by Lync, SharePoint, Exchange and Dynamics. In fact, sales of Dynamics grew 17 percent in the quarter. The VAR Guy’s Reality Check: Sure, Office 2010 is the Business Division’s cash cow. But channel partners should be taking a much closer look at Lync (unified communications) and Dynamics CRM and ERP — both of which have strong potential long-term upside, The VAR Guy believes.
3. Server and Tools: Revenue rose 10 percent to $4.25 billion. Microsoft reminded customers and investors that the Windows Server 8 developer preview surfaced in September. The VAR Guy’s Reality Check: Microsoft is filling its server pipeline with new partner and customer products. Also, continued growth for Windows Server proves Linux has yet to topple Microsoft’s empire.
4. Press Redial: Microsoft briefly mentioned Windows Phone 7.5 debuted with new features. Plus, Bing organic market share hit 14.7 percent. The VAR Guy’s Reality Check: Um… can we get some revenue estimates, Microsoft?
5. To the Cloud?: COO Kevin Turner mentioned that Office 365, Dymanics CRM and Windows Azure saw growing demand. The VAR Guy’s Reality Check: Frankly, Turner’s statement sounds a bit weak. Of course Microsoft’s cloud business is growing. But how fast, Mr. Turner?
Bottom Line: Microsoft impressed The VAR Guy with server application sales. But that generic comment about cloud sales growth didn’t exactly impress The VAR Guy. If Office 365 were truly performing well, Microsoft would have likely included adoptions and deployment numbers in the earnings release…
The bottom line? The fat man can dance after all. It’s just not Microsoft’s style to respond to competitors. It favors simply rolling over them. When that’s not an option and it has to compete against technically superior products from Google and Apple then Microsoft has to sweat a little. It’s kind of fun to watch them stumble onto the market dance floor. And it’s refreshing to see them work for their market share just like everyone else does.
Richard: The VAR Guy definitely agrees that Microsoft is working hard for market share these days. Good for Microsoft. Good for partners/customers.
-TVG
They are working hard for market share. For some partners it’s good, but for others it’s not so good. Because the Microsoft move towards cloud is changing the ratio of initial purchase fee and licence fees – advantage Microsoft – disadvantage partners.
In part, the improved results are from partners pockets and not on basis of actual growth.
….Or?