Microsoft's 16 billion-dollar businesses: An updated list

Microsoft's 16 billion-dollar businesses: An updated list

Summary: Microsoft officials say the company now has 16 billion-dollar businesses inside the company. We know what 15 of them are.

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As part of a set of stats Microsoft published this week, the company revealed it now has 16 different businesses currently at an annual $1 billion (or more) run rate.

16billionbiz

(This doesn't mean businesses with $1 billion in profits; it means businesses contributing $1 billion or more in revenues.)

In 2010, Microsoft had eight billion-dollar businesses: Xbox, SQL Server; System Center; Unified Communications; SharePoint; Developer Tools; Dynamics (ERP & CRM); and Online display and search advertising. Last year, SharePoint crossed over into the $2 billion per year category. And the Server & Tools business claimed six of Microsoft's billion-dollar babies.

Earlier this year, Microsoft added Windows Azure and Office 365 to its billion-dollar roster.

So what's the full list look like now? Here what I believe to be on it, in no particular order:

  • Windows (which also, up until now, included Surface, which contributed $853 million to the total in fiscal 2013)
  • Windows Server
  • Windows Azure
  • Office (client)
  • Xbox
  • SQL Server
  • System Center (client and server both, so includes Windows Intune)
  • SharePoint 
  • Visual Studio
  • Dynamics (CRM and ERP)
  • Online Advertising (search and display both)
  • Office 365
  • Client-access license (CAL) suites (formerly known as desktop access)
  • Enterprise Services (including consulting)
  • Enterprise communication business (Exchange plus Lync)

That's 15 businesses. What's number 16? I asked and have yet to hear back. But many of us company watchers think it's probably patent licensing, possibly even Android patent licensing specifically. Microsoft doesn't break out its Android patent-license revenues and has been reporting them in with Windows Phone (which has fallen under the larger Entertainment and Devices division).

Microsoft is attempting to incubate a number of new businesses and products, hoping to cultivate them so they become billion-dollar businesses as well. As is true of the current list, the list of those most likely to be among the next billion-dollar businesses for the company are primarily, if not entirely, enterprise products and services.

Microsoft is planning to explain the new way it will be reporting revenues, now that it has reorg'd more along devices and services lines, on September 19 at its Financial Analyst Meeting. In the interim, anyone have any other guesses as to what the missing billion-dollar business might be on the current list?

Topics: Microsoft, Cloud, Enterprise Software

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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15 comments
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  • Patent licensing is exactly what I was thinking

    Whatever else might be said about Microsoft, they made a lot of the early advances in smart phones. Windows CE was a real OS when most phones ran barely-there embedded systems. So it is no wonder they hold so many patents.
    Mac_PC_FenceSitter
    • hate to say it

      but CE is a port of mostly win98, very notably the network stack and security layers. Only recently have they begun to port the vista network stack to the CE OS.

      The real-time OS is extremely limited and most OEM's end up rewriting most of the BSPs as they are very feature poor and don't even keep up with the times, ie. there is no ARM 7 BSP out of box, and don't get me going on the ARM compiler that CE comes with, it is almost ridiculous how non-optimized it is.

      I don't think any CE patents if there are many, are of much value.
      CriticalSection
  • Fastest growing segment ?

    Android patent troll.
    SunFire23
    • Funny, but tragic

      If Microsoft make more from their patent trolling than they do from surface and phones. Have they just employed Darl McBride?
      meski.oz@...
  • Kudos, HUGE kudos to Microsoft

    But we keep getting told that Microsoft only makes money from Windows and Office?

    Huh, we've been lied to.

    Huh.
    toddbottom3
  • Microsoft's 16 billion-dollar businesses: An updated list

    That is quite an impressive feat. Microsoft was smart to diversify its product line up instead of being just a one trick pony like many other tech companies out there.
    Loverock-Davidson
  • I'd say it's 'Government Cooperation'

    The logic is this: Homeland Security annual budget was $53b when released a few years back; NSA has a similar amount to play with; CIA and FBI have extra budgets too for surveillance post-9/11. All up, the US government budget for 'snooping' is around $150-200b/year.

    Now Gmail, MS Hotmail and Yahoo together run a significant majority of the world's email. But what justifies offering a 5GB free email service? Both in terms of the huge server+disk farms to handle that storage, and the processing power to retrieve hundreds of emails per day per user... or even the keyword searches across thousands of emails at each client's whim. And all of that is hosted in the USA. Someone must be paying to have it all offered for free, and to remain hosted in the USA. On a cost basis, it would be cheaper to host mail servers in the countries where the clients lived, as most email is intra-country. But instead, pipes are paid for to route that traffic to the USA and then back to the recipient in the sender's own country. The world certainly does not route telephone calls that way!
    The only logical 'payer' for all the free email is the US government. Sure, some ads are hosted on web-based email, but these do not display when much email is read on smartphones. And the only 'payer' who would have any keenness to see it all hosted on US soil is the US government. So I suggest that of the $150b+ budget for surveillance, at least 5% goes for raw data collection. That would put more than $1b/yr into the coffers of each of Google, Microsoft (incl Skype) and Yahoo.
    So the government comes along and says to each major public email provider "You have to provide us a data feed" to which the companies respond "We may have to, but doing so will cost us money." And the G-men reply "Well, actually we've got a budget to cover paying for duplicate servers and pipes, so we remain informed, without compromising your existing services to clients."
    And THAT is how you get the $1b+/yr extra into Microsoft's books. But don't ever expect to see it labelled as "government subsidy" etc in the accounts, as that would imply complicity, prove how they were compromised, and run contrary to the company's legal obligation to not disclose that they are subject to such an secret order to provide information.
    harrison_graeme
    • Good analysis

      To this I would add an other data point. Back in time, the costs for the data pipes the rest of the world needed to communicate with the US was paid for exclusively by the non-US parties. For example, to connect a pan-European network to the NSFnet, it was Europeans who paid 100% of the costs...

      This all suddenly changed when the likes of "public e-mail" appeared. US companies even came to Europe to dig dark fibber through the continent and thus "lower costs". A very atypical activity for any US business.
      danbi
    • The fact MS won't say supports analysis it's 'secret' income

      In my original analysis I should have also noted that when most companies say that they have X businesses over $1b/yr in sales, they proudly rattle off what these businesses are named.

      But in Microsoft's case, they say the number of divisions, but won't disclose the names of the divisions or income streams. There is no competitive advantage, as their competitors know the MS marketshare in each segment. Maybe the source code is a secret, but the names of the divisions?

      It is very supportive of my analysis that one of the $1b businesses is a intelligence-related income stream that even the names were not released. If the company can't say what the businesses are, one of them must be secret.
      harrison_graeme
  • 16 billion dollar businesses; which is why I keep saying that, Microsoft

    is the company best positioned to survive a downturn in any of its divisions/businesses, or a whole economic meltdown by the country, and should be valued way over Google or Apple. Apple would become the Apple of the 1990s if the iPhone were to suffer a downturn, and Google would become another Ask.com if their search engine were to suddenly lose a lot of traffic.
    adornoe
    • Re: if their search engine were to suddenly lose a lot of traffic

      Likely, if the USG decides to hand the data collection contract to Microsoft, instead of Google?

      But, the world had changed. That could have worked years ago, but today -- teh data sources are many and varied and USG is wise to pay them all.
      danbi
      • The world changes, and changes again, and it's the same with the tech

        industry, and no one company can rest on its laurels, while hoping that the competition doesn't outdo them.

        Google has the top search engine right now, but, it's just because it had a head start on Bing, and it wasn't because it was a superior product. Google is doing so many things to irritate its customers, that, they could easily find themselves becoming number 2 in a short period of time. There is nothing that Google does that others can't do better, and even cheaper.

        How do you like the idea that Google thinks that you've given up all rights to privacy when using their G-mail? That's very irritating, and it's also very irritating when I use Google search and get haunted for a week or more with ads related to some search which I might have done using them. I use Google search as little as I can, and I don't use any of their other services, not even Android or their cloud services, or G-Mail, or anything else from them. I'm not the only one thinking like that, and we're lucky that there are alternatives to everything that Google does.
        adornoe
    • Google Losing Traffic

      Just that these days, Bing is the only credible competitor, while back then there was a plethora of alternatives. Also, Google has a massive advertising network (their true revenue source) as part of their search engine (isn't the search engine just a delivery mechanism for their advertising network?). I may not care for Google, but I don't see them becoming "another Ask.com" anytime soon - the competitive environment is completely different.
      WebSiteManager
      • There was a time when Palm was unbeatable, and RIM was the smartphone

        maker with the unbeatable device, yet, where are they now? Sears was the unbeatable juggernaut in retail sales, and, they're struggling to survive and remain relevant. Google is on top because they were the last remaining entry in the original set of many search engines, but they're not growing anymore, and, even if Bing isn't growing that much either, one bad move by Google could damage them beyond repair, and Bing would become the default search engine for most. No one company can remain on top forever, and even Microsoft's Windows could be displaced as the top OS on PCs.
        adornoe
  • Add Skype to the list

    Now Skype is officially a billioneer, does that make 16 or 17?
    mary.branscombe