A little while back there were predictions that, while Microsoft might continue to succeed in the enterprise market where it has multiple billion-dollar businesses, it would lose out on the consumer side to Apple and Google.
So does the 'collapsing' PC market mean that's finally happening? Not necessarily.
As Simon Bisson pointed out recently, PC sales are dropping not just because people are buying cheaper tablets that can do some of what a PC does, but because the PC they already has is good enough and they don't need a new one nearly as often.
Consumers haven't stopped needing those PCs, even if they use them less and use other devices more. Or, as analyst Rob Enderle put it recently: "PCs aren't being replaced by alien devices, rather, they are evolving into devices that are smaller, portable, and increasingly pull their performance from servers."
The merging of consumer and enterprise
There's also less difference between 'consumer' and 'enterprise' than there used to be (and not just because of the use of consumer devices and services in the office).
Businesses and home users both care about connectivity and uptime, because if my DSL or my cloud provider goes down then I haven't got my email, my photos or my business applications any more. They're both buying into services more than products: Office 365, subscriptions to Office Home Premium or extra space on Google Drive, for example.
Yes, the specific services a business and a home user buy will be different and have different features — and the service the home user gets might be free because companies can sell ads on it, or because it's a loss leader to tie them in to a broader ecosystem. Equally, consumer services often don't have extra features businesses need: I would prefer users in my office to put files on SharePoint Online or Box instead of Dropbox. But that's more about how well you understand your market; increasingly, the skills companies need to build and run those services are similar, and the way to make money from them is to have both efficiency and scale.
Devices and services
Describing yourself as an enterprise supplier or a consumer supplier used to mean you build products on very different platforms. Increasingly, the platform you build anything on is a cloud platform. For Microsoft, that's the services side of "devices and services" — and the experience it has in running the datacentres those services live in.
Microsoft's latest set of accounts include some interesting numbers around both.
On the devices side, CFO Peter Klein suggested on the earnings call that the days of buying a new PC because you'd had your old one for three or five years are probably gone, for businesses and consumers alike. Instead, you'll buy a new PC because it has a new feature you specifically need or a new form factor you really want, like a touchscreen or a detachable keyboard.
That keeps Microsoft held hostage to OEMs building new and interesting PCs — or the Surface team managing to build and sell enough devices to make up the difference.
We haven't been able to find out how much Microsoft made from Surface and the reason Windows had a better quarter than the PC market in general might just be the mix of selling Windows upgrades and selling multiyear licences to businesses. This combination of Surface, Windows 8 upgrades and Windows business licences adds up to a 40 percent increase in the revenue the Windows division makes that doesn't come from PC makers.
But the growth in the Office and Server and Tools groups comes at least in part from subscriptions to Office 365 and Azure.
"We are starting to get scale in cloud services. Growth in Office 365 is coming at a higher margin and Office 365 is really starting to get scale." He predicted Office subscriptions will be a good future business. "In the long term it's a great trend because we're building up a banked book of business on the subscription side that will become less and less connected to the PC market," Klein said.
Eventually, Apple App Store terms permitting, that will probably include subscriptions from Android and iPad tablet users. How will you tell the home and work users apart in that?
And on the consumer side, what about that 56 percent annual increase in revenue from the Entertainment and Devices division?
Month after month, Xbox outsells the PlayStation and Wii but, while it's selling more than other consoles, that's an increasingly large slice of an increasingly smaller pie: the 1.3 million consoles sold in the last year is a drop in sales of nine percent. Xbox Live membership, however, is up 18 percent to 46 million users — and revenue from transactions on Xbox Live (like buying games or renting movies or subscribing to music services) is up twice that, at 36 percent.
The 56 percent increase in Skype calls in the last quarter, to 161 billion call minutes, doesn't hurt either. That means Microsoft has built a very profitable services business on top of a good device business (which should bode well for sales of whatever the next Xbox turns out to be).
Merging Skype and Windows Messaging isn't making everyone happy (we've seen colleagues complaining about not getting chat messages for hours or days after they were sent) but Skype continues to be a huge business and a great buy for Microsoft.
Revenue for the business communications service Lync is up 30 percent. That's an example of services that are very different for businesses and home users, but that both rely on the same Microsoft networks and cloud expertise in the background.
Microsoft is not just Windows (or Office, or Surface or Windows Phone, or Bing). Microsoft has a lot of places to make money.
And no, those aren't all enterprise businesses, and no, Microsoft isn't out of the consumer market.
But with the way the industry is changing, having a foot in both the consumer and the business market might be the best way to win in future, because it's getting increasingly hard to tell them apart by what it takes to build a service for each of them.