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December 19th, 2013

Microsoft is an odd company, a strange admixture of genius and clumsiness, strategic vision and unscripted silliness. Steve Ballmer was no favorite of the punditocracy and left a while back with something less than a hero’s send-off. But around the same time, we wondered if Microsoft could be “The Comeback Kid,” noting how it has yo-yo’ed through the years. It is a unique story, this tech giant’s dramatic ups and downs, and often hard to fathom.

The “Relevance” Thing

In late 2012, Andreas Pouros, COO at marketing firm Greenlight, wrote in his Econsultancy blog that Microsoft would again be “relevant” in 2013. Despite a top-selling game console (seven years “mature”), a market capitalization approaching $230 billion, 90+ percent of the PC market, and an OS that you can even rent iMac computers to run, at the end of 2012 it was clear to Pouros and everyone else that Microsoft was not the world-changing juggernaut of its prime. Was it time for another Microsoft obituary?

Pouros had an emphatic response: No! In fact, he saw a turnaround coming, based on Microsoft’s “dominant position on the desktop” plus the company’s core strengths in gaming, OS, and two-way communication (Skype). Success in these areas would underwrite the development of products in what Pouros called “an exciting ecosystem that will make Microsoft a compelling choice for consumers.”

The “Devices and Services” Thing

However, the company’s major consumer device focus in 2013, the Surface line, did not explode on the scene and zoom anywhere near iPad rental in sales or market share. Pouros got this one wrong, but let’s just say Microsoft started a slow-growing fire in the segment, rather than a blaze. To finish off the company’s strategic plan, Pouros predicted Microsoft would buy Netflix to secure its new position as “a devices and services” company.

That didn’t happen (to be fair, it is still 2013) but how did the Pouros Prognostication fare, overall? Quite well, in fact: In its most recent earnings report (October 2013), Microsoft announced that quarterly profits increased 17% from the year prior, on sales that rose 16% to a bit over $18.5 billion. That was more than two-thirds of a billion dollars beyond Wall Street’s consensus estimate of $17.8 billion. Complete details of the report can be reviewed online, but for a quick overview here are lists of the “Strong” and “Weak” Microsoft operating units:

Strong

  • Business sales of Office and server software
  • Xbox One
  • Commercial licensing
  • Cloud computing for business

Weak

  • Windows
  • PC sales
  • Cloud for consumers (SkyDrive)
  • Device and licensing revenue from Surface line
  • Device and licensing revenue from Windows and Windows Phone product lines

Surface and Surface Pro sales hit $400 million, aided greatly by the blowout pricing on the original RT model. Finally, the Nokia acquisition will play out over the coming year(s) in surprising ways that are, as we’ve said before, often hard to fathom. And that prediction brings us full circle on our latest ride on the Microsoft yo-yo!

As always, we’ll keep you posted on the latest technology news. Do you need to be relevant for an upcoming project or event? If so, we can help by supplying you with the latest technology rentals to help get the job done. Complete an Express Quote online or call us today at (877) 266-7725.

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