Microsoft 2Q17 Earnings Call Notes

Satya Nadella

Examples of cloud customers

“A prime example is Mars, a $35 billion business with 60 brands. An early adopter of Office 365, Mars is using Office and Windows 10 to transform how its 80,000-strong global workforce collaborates while staying secure. And more recently, they have begun running mission-critical workloads on Azure with hundreds more on the way, including inventory management using Azure IoT. Swift Transportation, one of the largest trucking companies in the United States, is digitizing work for nearly 20,000 drivers with Office 365 and Skype and is using Azure to harness the data from their sensor-equipped trucks to optimize driver productivity and safety.”

Have reorganized the sales force to be more technical up front

“I would say the overall change that we are going through, and this has been ongoing for I would say the last multiple years, is transforming our field engagement model, where we’re putting a lot more technical depth in the front-line sellers so that they can engage, whether it’s data specialists, cloud specialists, security specialists, or even productivity specialists. Because it’s super-important for us in this phase when people are looking for solutions to help them visually transform, for us to have a very fundamentally different type of capability in terms of our sales, and that’s the transformation. And so we have really reorganized ourselves, both in the headquarters and in the field, to be able to recognize that shift.”

Seeing customers span cloud offerings

For example, in FinServ, some very Tier 1 trading applications now using some of our capabilities in service fabric, which is really a PaaS service, which allows you to manage microservices with low latency and high scale, that’s a place where we are seeing in fact activity, whether it’s game development or trading applications. We are seeing even interesting use cases of Azure functions, which is completely serverless. In fact, you can think of it as a price cut for anybody who cares about being very, very smart about cloud consumption. Going serverless is something that we in fact advocate. So across the board, I feel we have the right mix of IaaS, PaaS, SaaS, and per user SaaS services like Azure Active Directory, which gives us the right mix to be able to even have the right margins long term. We’re not concentrated in any one layer of the stack, which is something we do by design because our vision has always been that we want to of course offer all of these layers, and customers will choose depending on their needs and their scenarios. And we are now seeing even a single customer estate spanning all of these.”

Office as SaaS means always up to date and secure

“But in addition to that, I must say there are two other things that are increasingly becoming fairly relevant in the adoption cycle, which is moving to both Office 365 and Windows 10 and getting essentially to this new frontier for productivity, which is an always up-to-date operating system, which is secure, and an always up-to-date Office experience that is a SaaS service. We’re increasingly seeing that resonate, not just in small business and some of the high-tech industry as it has been in the past, but now even in the regulated parts of the enterprise. So we are very excited about that.”

Amy E. Hood – Microsoft Corp.

Expect continued FX headwinds

“Now let’s turn to the outlook, first FX. We had originally expected FX rates to lessen going into H2. However, given current rates, we expect continued currency headwinds for the rest of the year. For Q3, we now expect about 1 point of negative impact on total revenue. Within the segments, we anticipate about 2 points of negative FX impact in Productivity and Business Processes and Intelligent Cloud, and 1 point in More Personal Computing. “