Change is afoot at Microsoft.
In his first analyst call as chief executive of Microsoft, Satya Nadella indicated that he is open to experimentation with some of Microsoft's sacred cows, including Windows and its pricing. The goal, he said, was for Windows to become ubiquitous, and with a variety of pricing and business models to achieve that.
Although Microsoft's revenue and profits dropped compared to a year ago, the company nevertheless exceeded analyst estimates. Microsoft reported net income of $5.66 billion on $20.40 billion in revenue, with revenue growth in all of its product-centric business units. Microsoft said customer adoption and a shift toward cloud services like Office 365 and Azure, as well as its Bing search engine, helped boost its results.
Nadella, meanwhile, said he has used the first months of his tenure to re-acquaint himself with Microsoft and gain a fresh perspective. "The past two and a half months have been a period of significant change at Microsoft, but also a period of nailing the basics and delivering against our product and financial plans," he said during a Thursday afternoon call with analysts. "In the months ahead, we will continue to be intensely focused on two thingsrock-solid execution, and pivoting the company toward the future."
At another point in the call, Nadella summed it up this way: "I sum up this quarter in two wordsexecution and transition," he added.
At some point, executives usually pledge to reassess the business, to start over, and winnow out the chaff. That usually doesn't amount to much. But reading between the lines, it appears that Nadella truly is interested in breaking down and rebuilding some of the traditional walls that have bolstered Microsoft's business.
Pivoting is not something that Microsoft has traditionally done. In fact, the company has often become associated with staid product offerings, such as its Office suite, which have changed little over decades.
As Nadella noted, however, the company now plays in a market that is larger than just the PC. Nadella said twice that Microsoft will have a presence in wearables, although it's unclear whether Microsoft plans to push its software and services into third-party hardware, possibly using its Windows Embedded suite, or develop the devices itself. Microsoft closes its $7 billion Nokia acquisition on Friday.
"Overall, the way I want us to look at Windows going forward is what does it mean for us to have the broadest device family and ecosystem," Nadella said.
And to do that, Microsoft will have to play in a world whose rules have been defined by third parties — companies like Apple, which built a massive, though controlled app market; Google, whose free Android OS helped it break into the market, and dozens of low-cost tablet makers.
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