Weekly Update

Nadella’s first year shows he’s staying ahead of the cloud/mobile wave

Satya Nadella has had a good first year as Microsoft CEO, pushing hard on his bet on a ‘mobile first, cloud first’ strategy.

Quarterly (Q2 2015)  results for the company were reported a week ago, and while the consumer side of the business has hit headwinds, the future of the business — cloud computing — posted an annualized run rate of $5.5 billion, from Office 365, Azure, and Dynamic CRM Online products.

Top line revenue for the quarter grew to $26.47 billion from $24.52 billion a year earlier. Computer and gaming hardware sales fell 11% to $4 billion, with lowered Xbox sales. Commercial licensing revenue dropped 2%, mostly because of shrinking sales of Office commercial.

The important thing is that the transition to a cloud first footing for the business is proceeding at a pace that will allow Microsoft to stay ahead of the wave. Yes, the traditional Windows and Office revenue stream is falling, but the company’s future is cloud and mobile software. Even Surface contributed $1.1 billion.

Nadella has made a number of acquisitions recently, like the email app Acompli, now rebranded as Outlook for iOS (see The best Gmail client is Outlook? Really?), and the rumored acquisition of Sunrise, the popular calendar app (see Microsoft reported to acquire calendar app Sunrise).

Just as important is the push to roll out mobile apps on iOS and Android. Dan Frommer at Quartz pulled this chart together using data from AppAnnie showing Microsoft app releases by year:

microsoft-android-and-ios-app-release-dates-by-year-february-2015-android-ios-total_chartbuilder

The spike in ’14 is due to Nadella’s drive to get Microsoft technology on iOS and Android, and he’s succeeding. We’ll have to see how Microsoft’s email and Office war with Google pans out — and with Amazon now playing a spoiler role with its Workmail (see Amazon launches WorkMail to compete with Microsoft and Google), but Nadella is making a strong push to hold onto the hundreds of millions of enterprise customers that use his products daily, and to stay ahead on that mobile/cloud transition, which is going faster than most have predicted.