Microsoft held its quarterly earnings call yesterday, and CEO Satya Nadella pointed out the highs and lows of the data. These earnings, however, are for the previous quarter — a quarter that does not yet reflect the edict from Nadella to shift the entire culture of the company or the fallout of the massive layoffs announced by Microsoft.
As Mary Jo Foley reported over at ZDNet, Microsoft reported earnings of $4.61 billion — or $0.55 per share — for Q4 of fiscal year 2014. Both the net earnings and the profit per share fell short of Wall Street estimates. However, overall, Microsoft reported an 11.5% increase in revenue over the previous fiscal year and raked in a net profit of $22.1 billion for fiscal year 2014. Some Wall Street investors may be unhappy, but most companies would love to "fail" by making $22 billion.
What makes the numbers for the quarter and the year more impressive is that Microsoft has been on a bit of a roller coaster ride internally over the last 12 months. At this point last year, Steve Ballmer was still leading Microsoft, and he was driving toward a culture shift of his own. That was followed by the major acquisition of Nokia. Then, Satya Nadella stepped in and painted a completely different vision for where Microsoft planned to go.
The dust is still settling, and it's too early to say for sure just how successful Nadella will be in recreating Microsoft in his image. It's a challenging road to navigate, because Microsoft rose to dominance under a completely different tech paradigm, and it has seen the landscape shift under its feet — leaving much of what Microsoft is built on declining in relevance.
Microsoft was slow to react, and it's late to the party, but it may finally be on the right track. The Surface Pro 3 really is the tablet that can replace your laptop. The slew of new economy laptops and tablets that Microsoft's OEM partners are bringing to market will make Microsoft a formidable competitor in those arenas. Also, Microsoft's cloud offerings for both businesses and consumers are improving. With the possible exception of Windows Phone, Microsoft seems to be making solid progress in establishing its role in the new tech world.
I'm sure there will be more changes and maybe even some dramatic upheavals in how Microsoft works, including what products and services Microsoft focuses on. It's not easy to turn a ship that size around on a dime, so there are bound to be more growing pains.
Overall, this quarterly earnings report may have very little to do with where Microsoft is heading. If Microsoft changes the core of how it functions internally, and the products and services it brings to market, the past will not predict the future. The next couple quarterly earnings reports will be much more indicative of where Microsoft is going.
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Tony Bradley is a principal analyst with Bradley Strategy Group. He is a respected authority on technology, and information security. He writes regularly for Forbes, and PCWorld, and contributes to a wide variety of online and print media outlets. He has authored or co-authored a number of books, including Unified Communications for Dummies, Essential Computer Security, and PCI Compliance.