>The shares surged as much as 5.6 percent to a record $60.45. The last time Microsoft was trading near that level was in 1999.
Using share price is suboptimal because the number of shares outstanding has decreased significantly since 1999. Better to use market cap (which is share price times the number of shares outstanding).
(According to wikipedia) Microsoft reached a market cap of $618.9 billion in December 1999, which is $879 billion in 2015 dollars. In contrast, Microsoft's market cap today is significantly less, namely, $447.5 billion.
BTW, in Feb 2015, Apple reached a market cap of $775 billion. Since the computing industry's share of the economy was significantly lower in 1999 than it was in 2015, the data on market caps suggests that the 1999 version of Microsoft was significantly more dominant over the industry than the 2015 version of Apple was.
You understand though that if MSFT had 100B USD in cash and spent it all in stock repurchase, then, in theory, its stock price wouldn't move but its market cap would go down by 100B. The market cap is not a perfect indicator of the value of a business either.
If we start to nitpick, why not calculate share price in real dollar terms (take inflation into account), adjust for the average P/E ratio of US stocks, adjust for dividends etc...
> if MSFT had 100B USD in cash and spent it all in stock repurchase, then, in theory, its stock price wouldn't move but its market cap would go down by 100B
? In the process of buying shares back, the market capitalization would increase due to the increase in share price. The share price would absolutely move. This is why companies have stock buy-backs, in order to pump up the share price.
The 'buyback ratio' is the amount spent on buybacks in the past 12 months as a percentage of the company’s market capitalization, and is often used as a means to flag companies that are acting in a manner such as this.
The market capitalization is just share$ * # of shares. Did you mean book value? The book value of a company would reduce if you burned 100B in share repurchases, but even then I don't think it would be so simple, as that 100B in shares would now be listed as assets to the company and could be used as remuneration for the employees, among other things.
If the company ends up with less cash, then its market cap should be lower, not higher.
When a share is bought back by a company, accountants handle it by either cancelling the stock or turning it into treasury stock, which has negative equity value to cancel out its positive nominal value. In either case, the repurchased stock does not add value to the company.
To illustrate the point, consider creating a company that consists of three $1 bills. You create three shares of the company and sell them to three investors. Assume that the market is efficient and that each share is valued at $1. Let's imagine the company's balance sheet. It has $3 of assets (cash) balanced by $3 of equity (stock). Now the company decides to spend $2 on share buybacks. It spends $2 of its cash pile buying two shares from two investors. Let's look at the balance sheet now. It has $1 of assets left (cash) balanced by $1 of equity (the remaining outstanding share). If you like, you can optionally record the two shares the company bought as treasury stock, so that the equity is $3 of stock and -$2 of treasury stock, for the same total of $1 outstanding stock.
As you can see, the value of the company falls when it executes a share buyback. This makes sense, because after the buyback, the company is poorer.
> ? In the process of buying shares back, the market capitalization would increase due to the increase in share price. The share price would absolutely move. This is why companies have stock buy-backs, in order to pump up the share price.
Market cap is the multiple of shares outstanding vs share value. The number of shares would go down, but the market cap would also go down. You just spent a lot of money.
Also, the value of the company would go down because its cash equivalents would go down by the amount it spent on the buyback.
The buyback is the equivalent of a dividend. Every time a company gives a dividend, the stock price goes down by the amount of dividend it gives out.
> but even then I don't think it would be so simple, as that 100B in shares would now be listed as assets to the company and could be used as remuneration for the employees, among other things.
The idea is simple: because a company can't act as its own shareholder, repurchased shares are absorbed by the company, and the number of outstanding shares on the market is reduced
> This is why companies have stock buy-backs, in order to pump up the share price.
Why does this matter to them?
Stocks are very strange to me.. when I think of owning a business, I'd hope to get some share of the profits, which as I understand it, is dividends for stocks. This being the case, I always thought stock buybacks were a long term investment in the sense that the company would pay more upfront so they'd have to pay less dividends.
This makes sense except that companies seem to barely pay dividends now, I'm guessing because it's unfavorable due to tax reasons. This makes it seem like there's a strange disconnect between owning a business and deriving income from it, because now most people only buy hoping to sell at a higher price to others. But why do other people buy it at a higher price if the company doesn't pay more dividends? I find it all very strange..
Why does a company care about its stock price? Is it just to please shareholders? Prevent buyouts? Make it easier to compensate employees?
About the last question, all of the reasons you mention are valid (also management compensation is sometimes linked to share price).
Dividends and buybacks are essentially interchangeable as far as the shareholders are concerned. Simplifying a bit (ignoring taxes, transaction costs, discount on cash on the balance sheet, etc.), if you own 10% of a company valued at $100mn (i.e. you have $10mn in shares) and the company has $10mn in cash that it wants to return to shareholders it can either distribute dividends (so you get $1mn in cash and your shares are now worth 10% of $90mn) or it can buy back 10% of the outstanding shares. You could sell all your shares (you get $10mn in cash), keep all your shares (now they are worth 11.11% of $90mn, i.e. $10mn) or sell part of your holdings (and hopefully you'll believe me if I tell you that the stocks you keep plus the cash you get will make $10mn in total).
> Dividend and buybacks are essentially interchangeable as far as the shareholders are concerned.
But they are taxed differently, which is a huge deal for long term investors. Long term gains are taxed at lower rates and compound pre-tax, while dividends incur annual taxes at ordinary income tax rates.
Correct. This is another reason why buybacks are popular. On the other hand, some people might prefer to get steady income by default without having to liquidate periodically parts of their portfolio. And long term investors might not be happy when a company spends money buying back its shares at high valuations (of course they could sell if they think the shares are overvalued, but we are talking about long term investors).
There are other reasons than steady income that investors sometimes prefer dividends:
0. dividends force companies to be regimented about consistently creating income and not just sway with the overall market.
1. the shares are held in tax-deferred/tax-free accounts, so they taxable events don't matter to them. they prefer the tangible (dividend) to intangible (share increase from buyback)
Frankly, this is opinion is so uniformed I'm not sure where to start... so welcome to Finance 101.
> In the process of buying shares back, the market capitalization would increase due to the increase in share price.
Wrong. If that was true, you'd have a company spending money and having a market cap that increases. See the problem? Generating money out of nothing...
> The share price would absolutely move.
Wrong. If this was true, you would just buy stocks of companies that do buybacks and make some alpha doing that. In fact there is an etf that tracks just such companies and it underperforms the S&P 500: https://www.google.com/finance?q=NYSEARCA%3ASPYB&ei=TXkKWJjO...
> This is why companies have stock buy-backs, in order to pump up the share price.
Wrong. They buy back shares to return money to investors. If you have a pile of cash sitting in your books, you can either return it to investors by paying back dividends or buying back shares. Only way it would increase the stock price is by signaling that the company doesn't need money and can return it.
> Only way it would increase the stock price is by signaling that the company doesn't need money and can return it.
That's not completely true. If a company has $10bn of excess cash and a market capitalisation of $50bn you cannot simply assume that the business is worth $40bn. The market might be assigning a value to this cash lower than the nominal value (for example because there is a risk that the management will just do some stupid acquisition with the money). And beyond valuation considerations, stock prices are affected by supply and demand: buybacks create some artificial demand.
Sometimes people has some difficulty to understand than spending money in buybacks does reduce the market cap of a company, but I think is the first time I see someone argue that spending money in buybacks increases the market cap.
Market cap - what a company "owes" it's investors. Definitely on the liabilities side. The value of the company.
Cash - what a company definitely owns (and could, for instance, pay to it's investors)
So there is this measure of company's worth called "enterprise value" which is Market cap + debt - cash - assets. It sort-of is what you'd get if you acquired the company and immediately sold everything off. To put it another way : it's everything Microsoft has, other than the business it's involved in.
It can indicate that there are deals to be had. For instance if you pay $50 million for a company that has running accounts with $40 million on them, have you really paid $50 million for it ? You had control (through a company) over $50 million, and now you have control over $40 million and a company, so there is an argument to be made that you "only paid" $10 million.
So "enterprise value" is what you would really have to pay for a company, and for a lot of people considered a more useful metric than market cap.
What if you want to buy this company? His cash is your debt. The more he has, the more you need to borrow. The actual you get is the selling price minus the cash you get from this buying.
Even as a longtime Apple fan and inveterate Microsoft-hater, I have to hand it to Satya Nadella and Microsoft as a whole. Their success is deserved. I work with basically the full range of Microsoft products in my job and what I see is that everything has improved lately. Windows is better, Office is better, their cloud offerings are better, and even the Surface is better.
Now, if they would only improve the licensing process for Windows so that it doesn't drive people insane, that would be amazing.
I was with you until the "windows is better part"
Windows 10 has been the worst desktop experience I have ever encountered. From day 1 I have had driver issues, forced updates, no matter how I configure the time zone resets to GMT (which is great because it uses 3am as a time to restart and force installing updates). To say nothing if the awful UI. I had none of these issues with Ubuntu and I paid Microsoft for this headache so I could play games. I can't wait for more AAA Linux support, please take it home Valve.
Windows 10 seems to be degrading rather than getting better. It seems to have reached windows ME levels of stability on most of my devices. Leaving the win7/8 machines looking pretty good. The cool kids are always messing with it, so the stodgy maintenance programmers never get a couple years to fix all the crap they break.
Plus, the non stop UI "quirks" are probably worse than I can remember. The whole OS has turned into the windows file copy dialog. This is what I always hated about linux on the desktop, 1/3 of the crap doesn't work right..
For example, last night I was sitting in bed with my 9Y/O daughter when she pressed the battery saver icon on the tablet, and the estimated time dropped from 9 hours 31 mins to 8 hours 50 mins. To which I responded it seems like pressing the battery saver icon forced it to recompute the estimated time remaining, where before it had been showing a stale value. Pressing it on and off a couple more times we got it to shift up to 10 hours some minutes. Its like they can't smooth the power consumption for longer than a few seconds, and the recompute timeout is longer than the smoothing, so the value has large jumps instead of smoothing changing.
I could go on and on but its pretty obvious that no one is actually testing the UI, they are just letting some random people throw crap into it, and ship it. Worse its like their user metrics come down to, if less than 50% of the installs are using something then its ok to remove it (say classic mode).
This is bad. This is really really bad. This completely matches my personal experience. Microsoft QA under Nadella is only part of company I think underperforms.
As far as I can remember from "How Google tests software" , Google doesn't have whole QA division too (other than a elite kinda testers) and testing is integrated to developers job(SDET). This was not true for Microsoft for long time. It would take a lot of time for Microsoft to become on par with Google in testing.
That's not what happened. Layoffs were across the company but mostly focused on "redundancies" with the Nokia purchase. Of the non-Nokia-related layoffs, SDE, SDET, and PM were all affected. SDET took a bigger hit but it was nowhere near all of them. The discipline was renamed "quality".
Later, the quality org was merged with engineering, "eliminating" the testers by making them devs. This change happened across the company but not simultaneously.
Disclosure: Microsoft employee, but this has all been reported on. e.g. Ars Technica covered part of this:
I have worked mainly on OSX for my career, and recently had to switch to Windows for VR work. I started on Windows 7 and absolutely hated it. I hated the visual style of it, the awful UX of it, and just found it to be painful all-the-way-around. Sitting down at my desk in the morning, I'd almost always utter a small sigh of frustration just logging in.
When we finally got cleared by IT to go ahead with Windows 10 I was cautiously optimistic but after using it for a few months I was totally bought in. I will/would never go back to any pre-10 release.
I'm back on OSX now (new job) and still miss Windows 10 most days. I'm going to be building a personal machine soon, and unless the new MacBook Pro's can astound me it'll be a Windows 10 rig – no question.
Interesting. I have the opposite opinion. My measure of quality is how quickly i can do common tasks, and i found that Win10 gets in the way so much, that i am now installing win7 in my new laptops. Imho win7 hit a gold standard for usability in many years
Off-topic: Is it now possible to keep a Windows 7 machine on W7 and fully prevent it from being upgraded to 10 (without an absurd amount of effort being required)? My daily usage is probably 90% Linux/10% Mac but recently I've been considering setting up a W7 VM on my laptop. I do NOT want W10 at all, however, and don't want to even bother if it's just going to end up with W10 anyways (I've heard plenty of "forced upgrade" horror stories). If it matters, this would be a W7 Pro volume license.
I don't even remember if i followed said procedure, but my win7 installs no longer beg to be upgraded. Maybe MS pulled back its aggressive policy (also, i m in europe).
I can't answer for Op, but I've been a Linux user at work for many years and OSX at home. I sold my last Mac in 2013 and used Linux for a couple of years until I tried Windows 10. I never used (or plan to use) Windows for servers. I had interest in Nano Server, then I realized it's not free and although running in the cloud I could probably feel no big difference in spending, I just don't have expertise (or will to learn maybe).
I was making a list of things I like from Windows 10, but some are as good in Linux and OSX. To be honest I'm not entirely sure why I'm sticking to Windows 10. I think it is comfortable to use and I have no reason to leave it either. It is installed in the computer, it gets big updates every now and then. It looks stunningly beautiful compared to any other Windows before.
In any case here's a list of things I like right now:
- It just works
- PowerShell and PowerShell ISE
- Office and especially Outlook (with an Exchange server) and OneNote
- I've got Bash now, which runs Linux binaries, with apt-get and in a terminal that sucks less than cmd. I had a tingling feeling the other day compiling a Go app in my WSL window. I know Go is multiplatform, but it was fun to compile a Linux binary in a Windows OS and run it.
It feels a lot how OS X used to make me feel years ago. It just worked. The difference is that here I've got all the Windows software and I can choose laptop from Macbook-like stuff to a £149 Lenovo Ideapad 100S, passing through tablets of all sorts. The OS is the same.
I don't feel like I'm tied to a platform when I'm working on my laptop. I guess having multiple putty sessions to Linux servers opened helps a lot :)
I'm not so sure about Cortana and Edge. I want to like both, but so far my feelings are just "meh".
On the other hand, the updates are definitely more insistent than before; but I don't think I ever got an ultimatum without prior notice of pending updates. I too defer many times (after all, if I'm looking at the computer means I'm probably busy), but it helps me keep up to date.
Now that I think about it, I think I've found my computer restarted and installed updates overnight a couple of times in the last year.
"It just works" - in my experience it really doesn't.
- I run win10 on a Vaio Canvas Z, a pretty recent machine. Graphics driver crashes regularly, although it remains stable doing so, screen freezes for around 2 seconds.
- when I wanted to install international keyboard profiles it has become way worse then older windows versions, which already weren't great. On OSX this is a totally solved problem. On Windows it would often show me the wrong thing installed until reboot, couldn't switch over to something newly added, the whole list is buggy.
- the terminal... god I hate it. It's stuck in the mid 90ies. Even Apple who supposedly doesn't care about power users anymore, has continuously improved its terminal application and it has become pretty great. On Windows I can't even have a decent color setting that would make all the standard unix colors readable without doing all kinds of hacks in .bashrc. Yes it's MinGW, but it uses the MS given terminal as-is.
- preinstalled PDF support is still a joke. Can't even annotate or rotate or really do anything with it.
- I can't get the preinstalled Mail/Calendar to reliably connect to gmail, gave up after an hour of fiddling around. That thing is a complete joke. And I hate Outlook's UI even though I've developed for it in the past.
Is it really better than Ubuntu though? I guess I don't use Microsoft office at all, so that could be a compelling reason, but Linux can be Linux with any kind of UI you want. Which for me is anything other than the touch-centric metro monstrosity with pages and pages of menus. You can make it your machine instead of microsofts auto-restarting spyware bundle of bugs
I don't think it's better than Ubuntu, but it's not worse. There are some aspects where Windows would be a no-brainer (gaming) and others where it is catching up with Linux (development outside Visual Studio? I'm just a hobbyist).
I never got 3 monitors to work reliably on Ubuntu or Fedora, though. Apart from that, I could probably switch back to Ubuntu and be as happy.
I honestly haven't tried it on Mac. It also runs on Android and iOS which is great.
I'm in the market for a cheap-ish ultraportable with good battery and I'm considering a second hand Air or MacBook. When it comes to the OS, why would I go back to macOS?
(Note that I would go back if I've found a cheap enough Air ;))
I'm not saying you ncessarily should. Windows has gotten better, but still has some infuriating stuff for development, like the 260 character path-length limit. Mac has more native Unix stuff, if you don't care about that there really aren't huge differences in experience anymore.
The 10% that annoys me is mostly around the way update works. If you have long running processes (like security camera DVR software, big render jobs, etc...) having the OS decide to reboot in the middle of the night is a bit of a headache. I know you can disable the update service, but it would be nice if they just put that in the windows update UI.
The other part that bugs me are the re-appearing bloatware apps like 3d builder, weather, contacts, xbox, groove music, etc.... The flipside of the reappearing apps issue is Microsoft uninstalling my VPN client. They don't think it's compatible with W10, but it works perfectly for me so I have to reinstall it every time.
To get back on topic though, Microsoft's Azure is fantastic. The earnings boost is well deserved.
At least only major service-pack level updates actually cause everything to install/reinstall. It's kind of funny how Microsoft has their official "one version of Windows" marketing when there are clearly different versions with difficult names ("anniversary update").
But I laugh at your comment because I, as well, spent a day uninstalling the re-installed bloatware apps and re-installing my VPN client.
You completely misunderstood the whole point. The one windows does not imply it is one thing which runs on many thing , not at all. one windows whole point is you can use same design/API for your program and target as many device as possible, kinda like Java.(but not compile once , run everywhere part)
Sorry I meant the "Windows 10 is the last version of Windows" marketing. The anniversary update was a whole new version of Windows and not just part of continuous stream of updates.
I disabled Windows Update service on my laptop which is using Windows 10. Search for Services, scroll down to Windows Update, disable the service. I live in a country with very expensive data bundles. I simply can't afford to keep Windows Update service on.
We did this for our QA team because of our organization's configuration management policies. Previously Microsoft updates would install broken drivers for their test equipment.
I'm in the opposite camp. I haven't had any problems with W10. It's an improvement from W8 and way faster than W7. The only thing that was annoying me was the updates, but I disabled those with a tool.
Their Q&A for Windows also seems to have taken a big dive, despite all the feedback Microsoft is getting now with the permanent "preview" version of Windows 10 - or perhaps because of it, as a way for Nadella to cut costs with Q&A.
Windows 10 is more like a new product than not. It's going to take some time. I think that's okay, as long as the fundamental features of the OS are good, the compatibility and stability will catch up.
The forced updates have really screwed with our CI process, as well. We have one choice of cloud provider for Windows 10 SKUs - Azure - and it's been brutal.
Ah, to be young.
Bad Desktops: Windows Vista, Windows 8, Windows ME, Windows 3.1, O/S 2 Warp
Good Desktops: Windows 95, Windows XP, Windows 7, Windows NT
The difference is that those (well maybe not ME) got better as they aged due to bug fixes. 10, seems to create more bugs than it fixes with every update.
I have to assume that, with a codebase this large and entangled, when you fix one bug, you add a couple elsewhere. Plus, they are adding features, not only fixing stuff.
Strange, I see many people saying the same thing, but Ive hardly had any issues at all, though it was/is undoubtedly less stable than Windows 7. I decided to just let it auto-update though, perhaps that or other different config/usage is why.
In some aspects Microsoft has changed for the best (e.g. open source, developer community relationship) and in others it is changing for the worst. This is my list:
- Skype protocol centralization and crashing all the time
- Surface Book Issues
- Updates and malware detection that can't be turned off
- Windows 10 leaking information to Microsoft that you can't control.
- Windows Phone (down)
- Azure changing their price all the time and an admin console that is subpar
- We were trying to renew our MSDN Premium subscription for the last three months and they cannot do that because we are from Argentina and they are changing the internal system.
- State of the art notebooks like the latest Dell XPS with driver issues and lack of support for high DPI screens in Microsoft Office.
Visual Studios integration with so many other non-microsoft languages and packages is excellent. As a former msft hater, I have to agree with the parent.
I disagree. Windows is more awkward than ever. VS is more bloated than ever. All[0] of their developer solutions are geared towards the Enterprisifacation[1] of everything.
[0] I love generalizations.
[1] IE: Overengineered for the sake of developer resumes everywhere.
I disagree that anything is better. They're incrementally keeping up with technology. In fact, from my perspective, it feels like they hold us all back by leveraging their hold on offices.
There are a few comments on this thread about people disputing microsofts cloud revenues. I've got no extra intel or inside knowledge, however what I am seeing in the market suggests to me MSFTs cloud numbers are probably near to what they claim.
I lead sales and marketing at a small Microsoft partner. Even though we are an edge case we haven't lost a deal against salesforce.com for quite a while, and I am hearing similar reports from other established Microsoft partners here in Australia.
The combination of Dynamics CRM Online / Dynamics365 with the broader stack (BI, office365, azure) is extremely compelling to businesses.
And at a third of the price of salesforce licensing all we needed to have done was equal them to win the deals.
As Microsoft goes up look out for salesforce going down. They did a great job and set the gold standard, but the market has caught up and overtaken them now.
I've been trying to find Microsoft azure sales for years. As it is cool tech but could never figure out is it was actually selling. This report is no better in its obfuscation. First they state 12bil annualized run rate, ie they made 1 billion in june their best month. then they say "we are on track to achieve $20 billion in commercial cloud annualized revenue run rate in fiscal year 2018.". why not say actual revenue but that's just me. but the kicker is I suspect that a large chunk of this revenue is office 365. and can office 365 really be considered new revenue source and not just a migration from other office sales.
Microsoft has been doing an incredible job lately. With the announcement of native support for Ubuntu binaries, I've been excited to try Microsoft products for the first time.
Additionally, as someone who writes a lot of bash scripts, I'm excited that I'll be able to use them across platforms. The two main reasons I use Apple computers instead of Windows are build quality & the UNIXy background of macOS, and with their recent moves, they remove the last reason as a differentiating factor.
Even their cloud offerings are exciting. I use R to do a lot of statistics work, and now Excel has support for integrating R scripts hosted on Azure. This makes it much, much, much easier to get R code working in an enterprise setting, which has been a major hurdle for me previously.
No, I haven't had the right project come up (I'm a statistical consultant, so my projects are largely determined by my clients).
I've heard really good things about it though. It's supposed to scale well.
It's on the list as something I plan to use in the near future. We've had projects in the past where we shipping Excel workbooks that had VBA written to integrate with R from the command line, which is a horrible thing to do to both Excel and R. Replacing that with a cleaner integration will be nice.
If you look at the numbers their cash over the past few years have been relatively stable about ~24 billion in FCF. Now if we model that as a Perpetuity with 10% rate which has been historical rate of the market we get 24/.1=240 (not including inflation) if we add Net Tang Assets and some tax benefits if we write down goodwill we we end up with 56billion. However MSFT is trading for 450 billion. Where is this extra 150 billion coming from? Cloud has about 10% margin I don't see how the numbers add up.
Your difference is known as off-balance sheet intangible assets. This represents Microsoft's employee capital, and how the group of individuals are able to produce future revenue generation.
How do you value having a group of the smartest people in a field working for you to make money?
He's saying that in this low interest rate environment investors are not demanding 10%, but would rather be happy with something like 7 or 8% as their hurdle rate.
In finance speak, MSFT's cost of capital is dependent on the risk-free rate, usually the 10-year US treasury, which is incredibly low right now, thus moving MSFT's cost of capital (the 0.1 in your denominator) lower. A quick search tells me that their cost of capital is currently around 7%.
Also, you can't add assets in, since operating assets are required to generate that FCF. You can add in cash, though, which is pretty substantial for MSFT.
If you are evaluating a project from the MSFT perspective you might want to use their cost of capital, but as an investor if I can go get 10% why would I want to use 7% as my rate?
In any case lets use your 7% you end up with 400bill which is still 50billion less than what it is trading at.
Lending and borrowing rates are closely tied together since they're literally just two sides of the same market. Global long term rates have been slowly trending lower for the last few years.
Over a long period of time that is what the market has returned. It is not guaranteed.One year it might be down 50% one year it might be 50%, but if you look at 30years S&P has returned about 7.5%. 10% is a just a round number makes math easier. You can plug in a different number my point its hard to get to 450 billion.
The S&P only had 500 companies starting in 1957 using that as the start date you get: 6.170%.
S&P has returned ~6.5% over the long term in inflation adjusted returns. However, the trend has been lower returns over time and inflation is currently very low. https://dqydj.com/sp-500-return-calculator/ (You can look at the methodology, but they project further into the past.)
6.736% : 1871 to now
6.525% : 1900 to now
6.281% : 1930 to now
5.977% : 1960 to now
Further, there is a lot of volatility in these numbers consider:
7.446% : 1990 to now
2.352% : 2000 to now
PS Stable companies reasonably have a premium associated with that stability.
10% is not the normal discount rate for most people. I don't know what assets you are buying into but most assume a 5-7% discount rate because thats what most expect the long term growth of a diversified portfolio of stocks and bonds.
Only service I have really seen being used is O365 emails. Rest of the Azure is not really being used by most of our customer. They are still dipping their toes in water so yeah it look like smoke and mirrors. At least in my anecdotal experience.
Edit: I don't have an issue with down votes but seems like some people are angry. I just shared my experience.Can Microsoft show what is the revenue growth in absolute terms.They are including Azure credits into the Enterprise License Agreement and calling it cloud revenue. Availability of free credits does not translate into adoption necessarily. Enterprise customers are still evaluating the how costs will look like over a period of time.
IMO, Enterprise adoption of Azure is growing specially enterprises that rely on Microsoft stack exclusively.
In last quarter, I personally suggested to few friends at Microsoft stack dependent companies to migrate to Azure instead of mucking around with colo hardware, VMware, VM management, licensing etc. for external facing services. It is a change for me. Previously I used to suggest moving to Linux/open source stack to migrate to VPS providers or AWS.
That may be true, but for large companies they changed the business model where large account resellers would bid under cost to sell EAs, etc.
They effectively raised the cost significantly for perpetual licensing/SA to push you into services agreements. Simultaneously, you get favorable terms (ie. anything other than MSRP) only if you commit long-term. Upon renewal they try to make you give up your right to transition back to perpetual licensing for Office.
So my bet is this is bullshit, shifting office dollars to O365, which include plans where you're just renting Excel.
> IMO, Enterprise adoption of Azure is growing specially enterprises that rely on Microsoft stack exclusively.
Sure it is, I have no doubts about it's growing use. But that use is still in nascent stage so when Microsoft is reporting a sudden increase in cloud revenue is actually nothing but smart manipulation of ELA terms.
In reality Enterprise Customer aren't cloud ready . Simply running on premises virtual machines into cloud does not result in any benefits. Enterprise customers are not yet there to realize the cloud benefits like on-demand compute, containerization, resource right sizing. Though Windows 2016 might tip that balance.
Virtualization is taking to the cloud in a big way this year and next. Most of my clients are pricing out between azure, aws, and local providers/partners for their cloud VM needs. Vmware just announced a deal with Amazon I believe and windows server 2016 comes with gobs of stuff that's pretty clearly meant for being hosted up on azure.
It's not there yet for many since the WAN component is still too weak for many companies to migrate but when the need to remake comes up I'm seeing it in the cloud more and more, or dummy drops to the cloud. (Usb backup on premise and deliver the drive to cloud provider.)
My experience with Azure thus far has been not so great. Everything mostly works but the portal is just so painfully slow and difficult to coax along. Kind of doubt they will see the sort of exciting growth that AWS has seen, so yeah looking at accounting details would be key here.
I don't want to have to look up the commands every time I want to run a thing I do once a month, quarter or year. I just want to click a button that doesn't take 20 fucking seconds to load and isn't buried amongst a ton of useless menu items.
The joke in our office is that the Azure team gave the portal interface to the interns to do. It's a UI that's poorly thought out, poorly programmed and massively unresponsive.
It's so obviously been conceived of by a programmer who is inappropriately obsessed with their "innovative" modular design.
But a CLI? Certain types of people with amazing memories like CLIs, but please don't inflict them on the rest of us. They're shit. AWS's portal is good enough, but Azure's is rubbish.
The joke in MS offices that use the portal UX is often that it was a UI designed by Designers, or at least by someone who only ever saw screenshots of the UX in a powerpoint.
It's not much comfort, but know at least that the internal engineers feel the pain as much as you do and would love to see improvement in that area, but right now there seems to be a surprising amount of likely political willpower pushing its use against informed resistance. I make this post largely to encourage you to keep speaking up about the pain of the UI, since many of us certainly are internally.
The Node CLI is pretty good. Almost does everything the Powershell CLI does and works across platforms.
Their web portal is a lot better after they moved to the new "preview" one. The classic portal was pretty bad, but their transition from the classic to the new portal was even worse. There was a time period where certain operations were only available in the classic portal and other services were only available in the new portal. The transition took many, many months (maybe a year) and the new portal was initially very slow.
If you look at Google Cloud's and AWS admin portal, they are not really any better. Probably is a result of these cloud providers providing so many services, it's hard to organize it all. The others have faults also. For example, I hate how AWS does their form validation when creating new resources. You don't even know what's wrong until after clicking "submit" / "create", azure is more single page app like. With AWS, if the service you are creating requires a dependent resource like an s3 bucket for logging, you have to go create that dependency first. With Azure, you can choose to use an existing dependent resources or create new ones all in a single operation. There also seems to be less organization in AWS. With Azure, I like how Azure does their directory structure of sub panes. You can view all services at once with particular ordering like datacenter region or drill into a particular resource group or service type. With AWS, you always have to go to that particular service's "website" whether S3 or DynamoDB, etc.
I see enormous rates of adoption... Office 97 could easily be replaced by Staroffice if you wanted, but Office 365 is almost impossible to escape once you have put your data on it.
You guys know that institutional Wall Street investors aren't total idiots, right? They know this as well as you do. On the earnings call yesterday, more than one person specifically asked about the impact on revenue numbers of the migration from one-off to recurring payments, and seemed satisfied with the answers they got.
I'm not calling anyone an idiot, I'm just wondering whether their increase in share price is the result of developing new products or simply moving old products to a subscription model.
Creating useful /comparable to the end user editions of old (packaged software) products and offering them in a new way entirely is developing a new product.
People aren't simply signing up to pay by the month (though that can be desirable to some folks in itself). They're actually getting something different.
Another friendly reminder: Steve Ballmer is super mad at Gates and the board for ousting him. He is especially mad at Gates all the way back from succession. He obviously hates Nadella too. Jealousy is a bitch.
A lot of people seem confused at why an earnings boost in cloud revenues at the expense of traditional licensing revenues would result in positive market response. But you have to remember, there's a whole lot more to an earnings report than the sum of all the numbers in the balance sheet. Even more important is the story they tell.
In the last few years, IT has seen growth in new business lines such as SaaS, cloud etc. and a growth stall n traditional revenue (HW, on-prem & licenses etc.)
Older companies like Microsoft, IBM, Oracle have been making their bread and butter for decades in traditional technologies whilst new upstart companies like Salesforce, Amazon & Google have all established themselves as leaders within newer fields.
In a sector where being an early winner within new technologies is key for future revenue (like Microsoft & Windows in the 90's) the market is judging these older giants not at the revenue they bring in, but in their ability to retain market share and beat new players in the innovation game.
The boost in share price should be seen as a recovery from previous depreciation of share price (Nokia & Windows phone anyone?) and a belief the company has finally woken up to reality and is moving in the right direction.
It's funny that I didn't take my own advice 4 years ago.
A colleague asked me what stocks she should buy and I said Microsoft. She bought in at around $20 something.
Just took a look at MSFT. I was surprised to see that the stock has been climbing basically linearly for a solid 5 years now. I wanted to revisit the CEO/stock price graph now that we've seen a bit of Nadella's performance:
I was expect to see a nice perfect correlation of Ballmer = flat stock price, but it actually looks like the upturn began during his tenure. Speaks well for him, although overall it's not a pretty picture of his tenure.
In the nerd community in particular, there is so much wishful thinking that Microsoft will fail that some people actually believe Microsoft is and has been failing. It's fairly amusing given the reality.
You might also want to consider the long period between (August 2013) where it was announced that Ballmer will leave v/s when he eventually left (February 2014).
I would expect this, and I would expect this trend to continue for several years. Almost every Windows server running in a corporate machine room or departmental closet should be an instance in the Azure Cloud.
Microsoft will be delivering extra value by providing the hardware and taking responsibility for running these systems, and will generate recurring revenue for as long as the customer needs what's on those servers. This is a gold mine Microsoft can dig for many years.
Azure seems to have higher market share though? In HN I rarely see talk about Azure and I see a lot of Google Cloud. Out there, where I consult with enterprise customers among other things, I see a lot of Azure and almost no Google.
It would seem that Google sells well among startups and in the Bay Area while Microsoft sells a lot to enterprise.
The chart you linked to showed one thing very clearly - AWS is kicking everyone's butt. In terms of YoY growth, Google was the biggest at 162%. Microsoft and IBM should be very concerned about that considering all of the new datacenters Google has coming online in 2017.
The only company that leaps to mind that acts like they are actively afraid of Microsoft is Valve. It's the only explanation for keeping the SteamOS alive I can think of (and developing it in the first place, for that matter), and the way it has neither been shut down, nor really given the push it needs to succeed. It's insurance, and as long as it's a half-viable insurance policy, it's doing its job.
Everywhere else, either Microsoft is still the underdog against some very strong incumbent or incumbents (Azure, mobile), or the competition is a decade-old corpse (Office).
Valve isn't afraid of Microsoft, they're just critical of their motives. Steam will always be the destination for digital PC games and there's nothing Microsoft can ever do to change that. Everytime Microsoft has tried to challenge Steam they've failed spectacularly. Microsoft and PC gaming just don't go together.
Well, I think this is a bit rude. I myself am not a PG fan, but let's not be mean people about it (I come here because the decency high water mark is usually higher than other forums).
Some people have a track record, and you might trust them more because of it. They might still be wrong. Don't hold people up as demigods?
I'm not expressing an opinion about anyone with this; I would like to point out that being a genius is no bulwark against being a tedious windbag. Or heartbreakingly stupid. Or anything, really.
Using share price is suboptimal because the number of shares outstanding has decreased significantly since 1999. Better to use market cap (which is share price times the number of shares outstanding).
(According to wikipedia) Microsoft reached a market cap of $618.9 billion in December 1999, which is $879 billion in 2015 dollars. In contrast, Microsoft's market cap today is significantly less, namely, $447.5 billion.
BTW, in Feb 2015, Apple reached a market cap of $775 billion. Since the computing industry's share of the economy was significantly lower in 1999 than it was in 2015, the data on market caps suggests that the 1999 version of Microsoft was significantly more dominant over the industry than the 2015 version of Apple was.