Microsoft Azure is the cornerstone of Microsoft's building of the future. It's getting a little bit of traction lately. Steve Job's "other" company, Pixar demonstrated the use of Microsoft Azure in a proof of concept at Microsoft's Professional Development Conference, getting its acclaimed RenderMan software going as a SaaS application running on Azure. That's good news for Microsoft's shareholders. More good news: Microsoft "surprised" analysts this quarter with better than expected revenues from Windows 7 and from Office. Its net income rose 51% on growth in those "core products."   As TechCrunch's MG Siegler pointed out, Microsoft has lost more than $2 billion on its online businesses in the last year alone. As the late Senator Everett Dirksen was often quoted as saying (but no one could ever pin down exactly where), "A billion here, a billion there, pretty soon, you're talking real money." As the world moves inexorably away from the desktop and to a range of light footprint devices (mobile, tablets, whatever), and towards Open Source servers in the cloud, Microsoft's main sources of present revenue will go away. It's to Microsoft's credit that they use their still-robust Windows and Office businesses as "cash cows" to fund their lagging on-line business. But the fact remains that they are at least five years behind the completion, none of whom are asleep at the wheel and they are leaders in nothing online. As Siegler said, "Microsoft runs basically the worst Internet startup ever." Microsoft has many challenges. They ceded many markets to others long ago. Search. Mobile. Social networking. The list of past mistakes is lengthy. So their only hope in dominating in as yet undeveloped markets (like the Internet of things), where the technology is there, but marketing clout is not. Microsoft is so large that mere $100 million markets are uninteresting. Sarah J. Friar, a technology analyst and partner at Goldman, Sachs & Co. downgraded her recommendation on Microsoft to "Neutral." Daily Finance quoted her as saying, "We believe the intrinsic value of shares cannot be unlocked if the status quo remains, and we have increased caution near term on a more elongated PC refresh cycle, combined with the newer threat of notebook cannibalization from tablets, where Windows does not yet have a presence." She further noted: "Concerns over the longer-term sustainability of the Windows/Office franchise have clearly weighed on the stock." Her suggestions: jacking up the dividend to shareholders beyond the recent 23% increase, designing a coherent consumer strategy and exhibiting leadership when it comes to cloud computing. |
