Microsoft's new financial structure shows off enterprise strength

Summary:The goal of Microsoft's financial structure is to show data center expenses and commercial vs. consumer licensing revenue.

Microsoft outlined its new financial reporting structure under its "One Microsoft." The upshot: There are really two Microsofts and the enterprise business is the big dog on the block.

Amy Hood, Microsoft's financial chief, on Thursday outlined how the company will report its financial results. Here's a look at the reporting units and the financials for the year ended June 30.

msft reporting structure
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What you get out of these charts is the realization there are really two Microsofts---even though executives spent much of the financial analyst meeting trying to convince people consumer and enterprise were symbiotic.

More from Microsoft's analyst powwow:  Microsoft: Touch-first Office apps will come to more devices  |  Microsoft: Office 365 at $1.5 billion annual run rate  |  Microsoft: Surface made us better with Windows 8.1, OEM partners

Consider:

  • The enterprise licensing business dominates in sales with $39.7 billion in revenue for fiscal 2013.
  • Windows and Windows Phone on the consumer side had revenue of $19 billion in fiscal 2013.

Hood, however, did note that the acquisition of Nokia will change the picture for the device business. She said of the new reporting structure:

The goal is to show the progress we're making on devices and services more clearly. And the goal is to show more accountability to the gross margin profiles. Why make a change this big? In some ways it's hard. But adding accountability to our progress in all those areas and transparency in how we're doing in our devices and consumer efforts and commercial efforts is important.

Hood added that shareholders need to see how licensing revenue turns into services sales. Shareholders also need to better track Windows commercial vs. consumer revenue.

Add it up and Microsoft's reporting structure may be able to highlight what needs to be quarantined. Outgoing Microsoft CEO Steve Ballmer said:

For the first time over the last couple of years windows has done something other than just grow. And we understand the shift that is going on in the market.

Microsoft will hold a conference call next week to go over its new financial reporting structure as well as historical information.

msft expectations
msft 2014

 

Topics: Microsoft, Enterprise Software, Windows

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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