What happened at Microsoft’s 2013 Financial Analyst Meeting?

Microsoft Engineering Panel

Today at 1 pm PT (4 pm ET) at the Meydenbauer Center in Bellevue, Washington, Microsoft held its Financial Analyst Meeting (FAM) to explain its new financial reporting structure to Wall Street analysts.  This years meeting was unique because reporters were strictly proscribed from attending.  Unlike prior FAMs, only Wall Street analysts were invited; however the public did have access via a Microsoft Investor’s relations webcast.

Going into the FAM I had three concerns:

  • Who will replace Steve Ballmer as the new CEO of Microsoft?  What is the CEO search and succession plan?
  • What are the details about Microsoft’s $7.2 billion dollar deal to buy the Nokia handset division?
  • What impact did Microsoft’s reorg have on its financials?

The Microsoft panel comprised Steve Ballmer (CEO), Amy Hood (CFO), Kevin Turner (COO) and Chris Suh (GM Investor Relations).    There was also a motley mix of engineering leaders that included Julie Larson-Green (EVP Devices), Dr. Qi Lu (EVP Applications), Terry Myerson (EVP Operating Systems), Satya Nedella (EVP Cloud), Kirill Tatarinov (EVP Business Solutions) and Tami Reller (EVP Marketing).

Kevin Turner COO Public Cloud

The Lowdown

Here are the highlights from FAM2013:

Amy Hood opened and immediately said Microsoft would provide no update on the CEO succession plan so that pretty much expunged all hope of having my first question answered.

In addition, Office 365 is Microsoft’s biggest money maker.  Office 365 was the fastest growing product in the history of Microsoft with over a $1.5 dollars in revenue last year.  In fact, the Office division takes the largest slice of the product pie at 32%.   Servers & Tools takes the silver medal at 26% and Windows comes in third at 25%.

Clearly, Office is Microsoft’s cash cow and customers are feeding that cow some expensive cud.

As far as the Nokia deal is concerned, Microsoft mentioned it already had an integration executive named and mobilized before the deal so they feel poised to take on the future.

Qi Explaining the Reorg

And then there’s the reorg.

Qi explained that we can divide the reoganization into three sections:

  • Office, the productive suite
  • Communications with Skype and Lync
  • Search Engine suite of products featuring Bing

Qi tried to engender confidence with the investors by clarifying that the leadership team is both strong and well versed with the enterprise workloads.

Near the end of the conference, Balmer corroborated Qi’s sentiments when he said the purpose of the reorganization was “to fundamentally hone the strategy of focusing in on high-value activities”.

My musings…

During the presentation, I kept asking myself:

Did the reorg really put Microsoft in a better position to execute or did just help the executive team work differently?

Is different always better? I don’t know.

It seems like Microsoft reorganized the company to create a new strategy for gaining “speed” in the market (as Balmer put it).  But shouldn’t it be the other way around?  In other words, shouldn’t a companies strategy inform it’s decision to reorganize?  It feels like Microsoft got it backwards.  This is certainly a question I would ask if I were sitting in the crowd.

What do you think of the corporate shake up and Balmer’s impending exit?

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