This is how you earn money … is a series of weekly articles of Xataka in which we analyze the business model of large technology companies: which divisions give them real benefits and which do not, which are the real nuclei of these companies that have transformed the world. Today, one of the technological par excellence, the hegemonic of the personal computer that did not know how to adapt to the mobile era: Microsoft.
Microsoft is a company of contrasts especially if we see its last five or six years of activity. In this time he has had several successes, such as the expansion of his server business driven by Satya Nadella's management, the migration of Office from a payment model by license to a subscription environment, the development of new models of business in its video game division or the creation of Windows 10 an operating system very well received by the critic.
On the B side of the disk, several stumbles: smartphones have been abandoned in Google and Apple, the Windows application store has not advanced to the pace of competitors, has not found a way to reverse the bad trend of sales of PCs with Windows and tablets with their system operative have not been successful either .
Office and the cloud, upwards
Microsoft divides all its revenues into three major business divisions:
Intelligent Cloud : servers and cloud services such as Azure, SQL, Windows Server and Microsoft Consulting services.
More Personal Computing : collects the revenues of the Windows operating system, the Surface tablets, the Xbox business and the Bing search engine.
Productivity and Business Processes : both corporate and consumer sales of Microsoft Office or the products of the range Dynamics oriented to companies.
This is the evolution of the quarterly revenues of each of these divisions since mid-2015, when the first Nadella decisions began to materialize at the head of the company which arrived a few quarters ago .
Although the order of income left by these divisions has remained identical in these three years, the trend is different: while the division of Office and services to companies has grown at a very good pace and the business in the cloud is a cannon – despite being still a little away from AWS figures -, the consumer and device division has fallen almost a fifth bad news compensated by the fact that its total revenues have increased and are already estimated at 30,000 million dollars a quarter.
Windows is no longer the main product of Microsoft, Office and Azure take its witness
This explains that Nadella, contrary to what Ballmer planned, has canceled the unique division of Windows which is no longer its product or main focus, and instead has opted for artificial intelligence and the cloud.
This is also explained that after several major updates of its mobile operating system , Windows Phone, the ruinous business that was the purchase of Nokia and his insistence with the Lumia, Nadella admitted his defeat and recognized that Microsoft lost the train of smartphones . DEP Windows Phone, DEP Lumia
Aware that in the end consumer market things had gotten ugly, Nadella made some decisions that are marking his current progress, like giving a turn to the company to embrace the open source materialized in the purchase of Xamarin the release of 60,000 patents the purchase of GitHub or integration of Bash in Windows 10 .
The Microsoft post-mobile: artificial intelligence, open source and apps for iOS and Android
It also happened to try to compete against Google and Apple in mobile to try to sneak into these systems with its own developments, such as To-Do fruit of the purchase of Wunderlist; Microsoft Launcher heir to Arrow Launcher; the purchase of the calendar Sunrise or the launch of its Edge browser for Android .
But above all, what can most mark its future, is that commitment to the artificial intelligence : more than 5,000 engineers are already working on their related projects, such as the APIs for “cognitive services”, something that translates, worth the redundancy, into products such as the Skype machine translation or in experiments like his bot that chat with humans or that technology that puts feet of automatic photos as well as the recognition of emotions in video .
Xbox and Surface suppose, on the other hand, the ying and the yang of the section More Personal Computing . Xbox, in spite of having been beaten by PlayStation in the sales of this generation presents some powerful numbers and upwards. In the last year it has gone from 53 to 57 million subscribers of Xbox Live – it reached 59 in the Fortnite boom. Surface presents somewhat more modest figures and with smaller benefits.
Este travel, especially after the arrival of Nadella, has made both the brand value of Microsoft and its market capitalization have increased in recent times: in both cases is the third after Apple and Google in the first case and after Apple and Amazon in the second . Now it remains to see how Microsoft sits in that post-smartphone era.