Outgoing CEO Steve Ballmer pivoted to a new corporate strategy and reorganized the firm's structure in the throes of an historic contraction in personal computer shipments, which have now shrunk six straight quarters. Windows revenue has always been tied to sales of new PCs, since two-thirds of the licenses have been sold to OEMs, not directly to customers. And increases in Office sales have also been linked to PC sales.
To keep growing, Microsoft must somehow make up for the slowing Windows and Office revenue streams with others. Ballmer's answer was to reinvent the company, turning it from a purveyor of packaged software into a provider of hardware devices and cloud-hosted services.
The latter was the most successful last quarter, as server software like SharePoint, Exchange and Lync grew by double digits, and enterprise cloud services, including Office 365 and Azure, jumped 100%. Under the old reporting format, the Server and Tools division posted an 11% revenue increase.
Singh was impressed with the third-quarter results, but withheld judgment about the strategic shift's success. "Overall, they have done well, but this is going to be bumpy," she concluded.
Sign up for CIO Asia eNewsletters.