Microsoft FY 4Q15 Earnings Call Notes

3.6B in revenue for Surface this year

“In hardware, both Surface and Xbox had an incredible Q4. We more than doubled Surface revenue to nearly $900 million this quarter, capping off a year in which it delivered more than $3.6 billion in revenue. Both consumers and enterprise customers love this device. Surface is clearly a product where we have gotten the formula right, earned fans, and can apply this formula to other parts of the hardware portfolio”

Operating income declined 3% but EPS grew 11%

“Operating income declined 3% and 1% in constant currency. Earnings per share were $0.62, growth of 11% and growth of 8% in constant currency. ”

Brazil was especially poor

“From a geographic perspective, the majority of markets performed in line with our expectations. The notable exception was Brazil, where inflation and macroeconomic volatility weighed on our performance. Overall, macro conditions remain a challenge in some large opportunity markets like China, Russia, Japan, and Brazil.”

Our server business is not a legacy business, it’s an extension of the cloud

” I’d start even with the bold view that my server business is not a legacy business. We fundamentally think about servers as the extension of the cloud. I even describe it architecturally as the edge of our cloud. Every server, for example, has things like disaster recovery, backup, and tier-ing with the cloud. ”

Growth of Azure is coming in places that we’ve never participated in before

“: when I look at the total growth of Azure, the growth that’s coming now from some of the premium services, these are businesses that we actually did not ever participate on premise at all. Even EMS, when I think about our management, our management was just about Windows management. But we now have management data protection and identity systems that cross all devices in the enterprise, including the Internet of Things, and that makes it pretty exciting. And that growth is great to see.”

Windows 10 will build into the second half of the fiscal year

” So my bullishness for Windows 10 is more in the second half of the fiscal year, and of course it will build. It will build starting in a week’s time in retail and in the upgrades, but I see this in three phases.”

Inventory always gets tight in the channel before an OS launch

” before every launch we tend to have a tightening in the channel as they prepare and run reasonably lean. This is a healthy state. It’s within the range of normal. So I don’t think of it as a delay in the way you’re talking about it. It is pretty standard in fact, as Satya talked about, in terms of the dynamic’

We don’t have good mobile devices for business, but that is going to change with windows 10

” We’re going to have great flagship phones for Windows 10. That’s actually a segment we don’t today have good devices, and we hope to change that with Windows 10. We have in fact good traction in the business segment. This is business customers who are actually buying phone devices, which is basically a radio with essentially a smartphone to be able to deploy their line-of-business applications. ”

Talking about CRM and ERP

“And it’s not just CRM. I’m actually excited about our ERP business. Some of the numbers that Amy talked about is growth in the seats. And when I think about data as the new currency, we have lots of managed seats and a lot of data which all will move to the cloud.”

Every company out there is becoming a software company

“One of the things that we realize is as every company out there becomes a software company, beyond even our traditional reach through IT, everyone has a digital office inside the company. They are, in fact, doing things in advanced analytics and using machine learning, and that’s a place where we have some very unique capabilities. So that’s another place where we’re seeing wide adoption.”

You can always get into a trap of overspending on sales and marketing in business apps

“one of the keys in business apps is you can always get into the trap of overspending in sales and marketing and not having long-term leverage at all. One of the things I feel very good about our position is how do you really build a long-term profitable business; that’s front and center to me. So we will not overspend there in sales and marketing because we do believe the products”