Microsoft beat analyst estimates today with what look to be some pretty good numbers. But what struck me were not the numbers themselves, but how much harder it is to dig into a few key metrics now.
When I loaded up the press release, I wanted to see where the Entertainment and Devices division stood after the Xbox One launch. And I wanted to see just how much blood still surrounded the Online Services Division.
Unfortunately, you can no longer see such numbers — at least not easily.
Last year, Microsoft announced a company-wide reorganization and as a result, the standard business units shifted. Last quarter was the first in which they reported earnings based on these new units, but today was the first time I actually tried to dig into the numbers post-re-org. Forget about it.
Server and Tools
Online Services Division
Microsoft Business Division
Entertainment and Devices Division
We now have:
Devices and Consumer Licensing
Devices and Consumer Hardware
Devices and Consumer Other
Give Microsoft some credit, they’ve managed to obfuscate the hell out of these divisions. Why? Well, I’m sure Microsoft’s official stance is that it streamlines things internally. But it can’t hurt that it also makes it a little bit harder for outside parties to tell which individual businesses are doing well and which are flailing.
They no longer have to report massive losses in the Online Services Division because there is no longer an Online Services Division. What luck!
Weirder still is the decision to move from breaking out operating income for each division to breaking out gross margin. One is the bottom line, the other is, well, decidedly less straighforward to any outside interested party.
Basically all we know now is that Microsoft’s licensing business rules all. Mainly on the corporate side of things, with consumer sales dwindling. But we already knew that — it’s just more pronounced with this re-org.
We also know that the consumer hardware business revenue is getting better (which Microsoft touts in the release), but the gross margin there is actually going the wrong way.1 Overall, this remains a tiny part of the money Microsoft actually keeps — and it appears to be getting smaller, for now.
And we know that “other” is well, other.
If you can look past the changes, what you still clearly see is a business dominated by two divisions. But it’s no longer Office and Windows, it’s Consumer Licensing and Commercial Licensing. And increasingly, the tide is shifting towards one: Commercial Licensing. That is, Windows, Server, and Office sold to businesses. The slow decay continues…
Microsoft may have re-org’d itself into a kingdom with one division to rule them all.
On a yearly basis. Which you may expect given the new Xbox hardware — though Microsoft says it sold nearly as many Xbox 360s and Xbox Ones last quarter (3.5 million versus 3.9 million). ↩