Microsoft says (what else?) that its cloud biz is growing


Adoption of Microsoft’s cloud software is growing like gangbusters, at least according to Microsoft execs on the company’s second quarter earnings call. Seats of the key cloud products — Office 365, Windows Azure and Dynamics CRM — all rose 100 percent year over year, said CFO Amy Hood.

What’s less clear is how much of that growth comes from new customers versus users who are moving over from traditional Office and CRM products to their new SaaS incarnations. Of course, given the huge installed base of Office and Windows, it’s pretty hard to find these “net new users.” Microsoft is in the tough position of having to cannibalize its own Office and CRM user base before those users are wooed away to rival SaaS options like Google Apps or

Microsoft said revenue from those cloud products doubled year over year, although the total number is murky since the company lumps revenue from those products into the “commercial other” category. Revenue for the umbrella category grew 28 percent year over year to $1.78 billion from $1.39 billion.

Microsoft is not alone in offering somewhat nebulous cloud numbers. Amazon puts its Amazon Web Services numbers into the “other North American Sales” bucket, and IBM, Oracle and other legacy companies moving into cloud also make it difficult to see just what’s what when it comes to cloud sales and revenue.

A few other notable details from the call:

  • The overall PC market did slightly better than expected, with stronger Windows/Office sales in large enterprises than in small and medium businesses.
  • The consumer PC segment, however, continued to be “soft” as it’s facing competing devices like tablets.
  • Microsoft Surface revenue more than doubled to $893 million year over year for the quarter.
  • CEO Steve Ballmer was nowhere to be found and there was no update on the company’s CEO search.



Microsoft’s cloud services do not cannibalize their software licenses. They are incremental costs for the services above the license. So if a customer purchases SharePoint online, they pay for that and they continue to pay for the license. Even in their subscription model (which include the service and the license, they are incrementally more.


People probably should NOT expect much profit from the public cloud (and that includes AWS). Public cloud arena has become that of PC OEM: Every cloud vendor can pretty much offer the same services that every other vendor is offering so there’s no big difference b/t them except pricing, which inevitably leads to a pricing war so he who’s able to cut his profit margin to the thinnest wins, well, BY GIVING A LOT PROFIT UP.

We’ve seen that in the PC market. DELL, ACER, HP and so on all have quite a bit revenue but when it comes to profit it’s miserable. In order to make real money from cloud someone has to provide some unique services. Perhaps SAAS is the option. I don’t know. I just know hosting a public cloud is not.

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