Monday, 13 April 2020

Microsoft:Revenues and Product Mix

There are very few companies on the face of this planet that have impacted our daily life and Microsoft is one of them. Today it is hard to imagine any workplace or home anywhere in the world without Microsoft products or services. Over the decades Microsoft has transformed it self from an operating system software provider to a commercial cloud solutions giant.
 
Microsoft reports its financials from July to June each year unlike most companies which report financials by calendar year. Microsoft's revenues for YE June 2019 clocked $ 125.843 billions growing at a CAGR of 11.35%.


Microsoft revenues for the trailing twelve months ending on Dec 2019 added up to $ 134.249 billions which are classified into three segments as shown below.


As per Microsoft's Annual Report 2019 the following is the description of the composition of their segment-wise revenues:

Productivity and Business Processes
Productivity and Business Processes segment consists of products and services in the portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:
     Office Commercial, including Office 365 subscriptions and Office licensed on-premises, comprising Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, and related Client Access Licenses (“CALs”).
    Office Consumer, including Office 365 subscriptions and Office licensed on-premises, and Office Consumer Services, including Skype, Outlook.com, and OneDrive.
     LinkedIn, including Talent Solutions, Marketing Solutions, and Premium Subscriptions.
    Dynamics business solutions, including Dynamics 365, a set of cloud-based applications across ERP and CRM, Dynamics ERP on-premises, and Dynamics CRM on-premises.
Intelligent Cloud
Intelligent Cloud segment consists of public, private, and hybrid server products and cloud services that can power modern business. This segment primarily comprises:
     Server products and cloud services, including Microsoft SQL Server, Windows Server, Visual Studio, System Center, and related CALs, GitHub, and Azure.
     Enterprise Services, including Premier Support Services and Microsoft Consulting Services.
More Personal Computing
The More Personal Computing segment consists of products and services geared towards harmonizing the interests of end users, developers, and IT professionals across all devices. This segment primarily comprises:
   Windows, including Windows OEM licensing and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows Internet of Things (“IoT”); and MSN advertising.

     Devices, including Microsoft Surface, PC accessories, and other intelligent devices.
     Gaming, including Xbox hardware and Xbox software and services, comprising Xbox Live transactions, subscriptions, cloud services, and advertising (“Xbox Live”), video games, and third-party video game royalties.
                       Search. 

Apart from these products Microsoft also invests in Research and Development to build new products and services and intellectual property. For the year ending in June 2019 Microsoft invested close to $ 17 billions on research and development expenses.

 As of YE 30 June 2019, Microsoft total revenues were $125.843 billions and segment wise revenues are broken down in the pie below. More than 50% of Microsoft's revenues are coming from cloud related services and Windows accounts for only 16.21% of total revenues.


Microsoft's Server Products and Cloud Services is the fastest growing segment @ 19.61% CAGR in the past three years while office products and services grew at a rate of 10 %.


As per Microsoft's annual report 2019:

No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for fiscal years 2019, 2018, or 2017. 


At a conference organized by Microsoft in Mumbai recently, Satya Nadella, stressed on the importance of building tech capacity for every organization in the digital era. Microsoft offers to collaborate with its customers in digital transformation with solution areas including:

  • Applications and Infrastructure
  • Data & AI
  • Business Applications
  • Modern Work Place
  • Modern Life
  • Gaming
Microsoft is well and truly on its way to achieve its mission 'to empower every person and every organization on the planet to achieve more.'

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