I am â€œlive bloggingâ€ the Microsoft (MSFT) Financial Analyst Day. But unintentionally what I am doing is characteristic of Microsoftâ€™s approach to its â€œâ€¦ Liveâ€ services:
- Iâ€™m â€œin and outâ€ because of distractions.
- And Iâ€™m not really online but sending this down the wire at the end of the session.
In order of appearance but not necessarily importance:
Bill Gates: Gates believes Mooreâ€™s law is being amended to â€œslower than halving and doubling every 18 months,â€ which was inevitable of course. However the ubiquity of broadband helps overcome that problem just in time, in Gatesâ€™ opinion. I hope heâ€™s right but what more can you say.Â If he isnâ€™t, analyzing information technology (IT) is going to be about as interesting as analyzing the corn-flake market.
Steve Ballmer: Iâ€™ll need to look at the transcript to make sure I heard him right but Steve Ballmer this morning went past the Microsoft â€œSoftware PLUS Servicesâ€ business model mantra to say that Microsoft is going into the devices and advertising businesses as well.Â
Iâ€™m sure Ballmer thinks that he has to go into the advertising business to compete with Google.Â But as weâ€™ve said, Google is not in the advertising business. I thought Microsoft bought aQuantive to add more software that it could build an enterprise service around but maybe Iâ€™m wrong.
And Ballmer talked about competing with Sony and Apple in the device business.Â I donâ€™t know why he thinks he has to go into their business.Â He must like taking billion dollar write-offs when hardware breaks down, carrying inventory, and all those other fun 20th-century type things.
Sell! Sell! Sell! Or just sit because I donâ€™t think Steve will get a chance to execute that plan anyway.Â In fact, I donâ€™t think the Software PLUS Services strategy will ever really happen. In the end (meaning a good end or a bad ending), it is all going to turn on services.
Jeff Raikes: In the Microsoft Business Division, the new buzzwords for Microsoft are unified communications and business intelligence (BI), when aiming at the information worker in larger enterprises.Â In smaller businesses and among consumers, the idea is to sell many more PC users up to Office, monetize those that havenâ€™t been paying for Office, and monetize more of the discrete functionality within Office as add-ons.Â The latter is a â€œâ€¦ Liveâ€ play so will be the most critical in my opinion.Â There was not a lot about the Service part of Software PLUS Service in this section.
Kevin Turner: Turner talked about â€œgrowing and expanding the core.â€ Closing the loop on the subjects he and Jeff Raikes were presenting on, Turner framed his discussion around Vista and growth especially in emerging geographies. I didnâ€™t do the math but when you look at the growth rates outside the U.S. that Turner presented, especially in the BRIC countries, you wonder what is really happening in Europe.Â Maybe we hear so much open source software (OSS) discussion out of Europe because they really are voting with their feet against Microsoft. This would give Microsoft all the more reason to walk away from the EU, as I have opined about (just because it would be such a great story, not because I really believe it will ever happen).
Microsoft rightly set the meeting up so that the financial analysts got their first chance at formal questions immediately following Turner. The questions covered
- Unified communications
- Windows 2008 (with virtualization on Windows 2008 to follow 6 months after its RTM)
- How much Microsoft plans to grow the core
- The numbers for Office
- Channel conflicts with â€œâ€¦ Live services (this came from the same and only financial analyst that asked about â€œâ€¦Liveâ€ at last weekâ€™s quarterly conference call; he was with Sanford Bernstein and he gets it even if Microsoft still doesnâ€™t)
- Windows volume licensing annuity penetration rates
The answers were right out of the company handbook so nothing very revealing in this session.
Kevin Johnson: Johnson started the discussion about what was happening outside the core Microsoft of client/server application and infrastructure software and tools, highlighting some tactics to support online advertising as a business. He talked about the content Microsoft will create to attract eyeballs and followed up with what he will do for publishers.Â He wants to be measured by â€œâ€¦Liveâ€ ID, if you want to build a model. Not that I believe Microsoft will stay with this idea for the long haul anyways but if they do, Google wins (unless Google changes its tune and also tries to get into the content business).
Johnson talked about aQuantive, which is good acquisition even if I am correct that the â€œadvertising businessâ€ will be folded into a more traditional SaaS model sooner rather than later. Johnson also announced the acquisition of ACN (sic-press release not available yet), an â€œexchangeâ€ for advertising spot buys and similar middleman activity.
Despite all the talk about advertising, an astute analyst kicked off separate questioning of Johnson by asking where is the â€œkiller serviceâ€ that distinguishes Microsoft the way search distinguishes Google (GOOG), CRM distinguishes salesforce.com (CRM), and so forth His answer was that all you see and much that you havenâ€™t seen yetâ€”because it hasnâ€™t been acquiredâ€”will all be â€œbrought together the way Microsoft brought together PowerPoint, Excel, Word and Outlook under Office.â€
Despite most of his formal talk, 4 out of 5 of the questions that followed his talk were on services, three of them about Search. The analysts didnâ€™t see how Microsoft was going to get from here to there (there being Microsoft as a viable competitor of Google). On the advertising side, Johnson said that â€œmore than 50%â€ of revenue will come from publishers. OK, that shows a little understanding of what Google is doing.
— Dennis Byron