What to watch for at Microsoft's September 19 analyst meeting

What to watch for at Microsoft's September 19 analyst meeting

Summary: Microsoft is resurrecting its Financial Analyst Meeting this year to share more on its planned reporting structure and other details about its reorg. What should and will officials discuss?

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Microsoft officials said during the last earnings call that the company was planning to resurrect its Financial Analyst Meeting (FAM) this year to provide more details on its reorg and reporting structure.

msftFAM

Microsoft officials announced a cross-company reorg on July 11. So far, there's been no word as to how Microsoft plans to report its results, now that the five business units have been replaced by four engineering organizations, plus a central marketing team.

The date of this year's FAM is September 19. (And so far, at least, it looks like press are not going to be allowed to attend, unlike previous FAMs. I'm hoping we'll get to watch a Webcast, at least.)

Brent Thill, an analyst at UBS, in a note to clients, acknowledged that Microsoft is in the midst of its transition to a devices and services company. But earnings-per-share "volatility has increased due to a shift to "lower-margin hardware and sub-scale cloud services in the near term."

As a result, Thill said, "we think MSFT needs a convincing argument and give specifics around the economic profit shareholders can expect from this transition, (as) ambiguity risks investors may walk away and the stock stalls out."

Here are Thill's five "hot topics" that he and his team want to see addressed at FAM:

1. greater clarity on margins
2. metrics that show cloud services traction
3. details on its strategy for competing in hardware (given the $900 million Surface RT write-down and low revenues for year one of the Pro/RT)
4. evidence that Microsoft has creative plans for its cash stock pile, which is approaching $100 billion
5. information on what the company is thinking on the succession planning front (who runs Microsoft after CEO Ballmer)

Michael Turits, an analyst with Raymond James, had his own wish list for topics for the 19th. He said he is hoping to hear discussion around

1. long term financial impact on margins, revenue and capex of the transition to cloud, Azure, Office 365
2. real numbers around Azure, Office 365, and the business plan for each
3. next steps on the consumer side, given inability of Windows 8 to stem declines in PCs and make headway in tablets and phone
4. more details on company reorg impact on financials
5. changes in capital structure given more capital investment and desire of investors for more buybacks and stronger dividend

I'm kind of doubtful we'll hear much, if any, of these details at FAM -- and at least not in any kind of real detail. 

Officials said during Microsoft's July 18 earnings call that they will be discussing "our strategy, our new organizational structure, and any changes to our reporting segments, as well as more on Microsoft's year-ahead outlook during FAM this year. 

What else do you think Microsoft execs should, could and actually will discuss on September 19?

Topics: Microsoft, Cloud, Microsoft Surface

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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  • Microsoft will try and convince share holders it's about the long game...

    I believe, they will continue to monopolize retail with Windows 8 removing the Windows 7 option as much as possible for most consumers, they will push everything to the cloud to spite consumer distrust, and encourage lease style licensing while making license ownership and local installation of Microsoft products punitive; and even if share holders are skeptical, they'll ignore any concern that financial loss will be the result for some time to come...But they'll also remind them of the glory days of a 1990's era Microsoft where people paid anything because they had to and Microsoft held all the cards. It's be implied that they will tie competing products up in court or in lieu of that, they'll continue to make non-standardized standards and support Microsoft Internet Explorer only web services as they've always done...

    But in the end, the analyst meeting will be Microsoft's promise that a hardware proprietary Microsoft tied into a pay as you go cloud drive will bring the revenue in 10x later once competition has been stifled and consumer outrage cowed.
    Socratesfoot
    • I hope you're wrong... but fear you're right.

      The only thing a FAM might be good for is if Ballmer announced his desire to spend more time with his family. Sadly, with Microsoft's BOD I don't think this will happen.

      The FAM might actually speed up Microsoft's death spiral... if analysts realize that Microsoft really has no workable plan, the stock could plummet, much as it did with IBM when the market realized just how rotten to the core it was in the '90s. I can remember IT people of the time saying things like "I have most of my retirement in IBM stock", "It's a great company, how could this happen", "IBM is too entrenched in large companies for it to fail". Yet, if you weren't living IBM every day, it was very clear it would happen. Sorry to all those Microsoft dependent out there, but you need to wake up... Microsoft is about to fall hard. It's a "when", not an "if".
      brian_st
  • Atari can sympathize

    A few years ago Atari was in the middle of trying to transition from a hardware company to a software company.

    Microsoft is trying to go from being a software company to a hardware company, although I'm not entirely sure how that squares with the push to the Cloud.

    Cloud is inherently a centralized hardware pure software play. The entire Centralized play then becomes for intents "pure R&D" which sounds very costly to investors.

    One of the leverage points of a platform with third party developers is they share the risk and the cost of developing popular third party applications and establish new Franchises.. consider the Oracle Database line of products. By reducing on premise and "assuming" all the cost and "all the risk" while voluntearily giving up margin seems to not make sense.
    jwillis84
  • What to watch for at Microsoft's September 19 analyst meeting

    Baldy will hold a short meeting at which time all the executives will draws straws. The shortest straw gets the privilege of resigning first so as to avoid further questioning on why Surface Rt totally failed to stimulate the current marketplace and what significant improvements can we hope for if any with Windows 8.1. ..
    Over and Out
    • This is wrong!

      Listen "Enough said",

      You don't know what you're talking about. Baldy already went through the straw drawing and Steve Sinofsky won, so now he's gone (and what a happy man is Sinofsky).

      The news is out that Linux is the worlds most popular operating system and the Linux ecosystem is now trouncing Microsoft. We, including Ballmer, knew this was inevitable, so I would like to hear, in substantial terms, how Microsoft is going to dump windows and all those legacy applications and transition over to Linux.
      StevenAbaby
      • The sock-puppet speaks.

        pray tell how on the alternate reality world you live on that all this came to pass.
        John Zern
    • You will troll with your last breath

      and worry not about the integrity you lose with each passing lie you tell.
      John Zern
      • John Zern....come back to me when & if 8.1 dosen't turn things around

        and admit that I saw it comming first.

        With the desktop sales being totally flat and W-8 anything having totally no positive effect on the market, just what do you see in W-8.1 that's going to change things for the better.

        I'm running 8.1 as we speak and it's better than W-8, but its not going make 50,000,000 people go out tommarrow and buy it the way W-XP did or W-7 did.

        The Metro UI isn't for everyone and getting use to flashing or non flashing tiles takes lots of time to get used to.

        Most consumers HATE change otherwise you wouldn't still have 37% of the market still using W-XP. The W-XP U.I. makes people happy to go work or what ever and get things done. I have plenty of friends that love W-XP and arn't moving, with some still using Vista and some on W-7. My W-XP arn't going anyware till they forced to.

        THe real world John is that todays hardware dosn't ware out so prople arn't upgrading like they used to.

        All the different Office suites out there are almost all the same.

        Picasa does almost everything the average user need, So where does that leave Adobe Photoshop? selected market.

        Stupid cameras in phones and tablets are killing Nikon/Canon DSLR market.

        Tablets are the rage now, but their are to many of them. TABLETS are jacks of all trades and MASTERS of nothing.

        PS and all these stupid in complete third party apps SUCK as far as I'm concerned.

        Dumbing everything down or making it into Widgets won't solove all the probles out there.

        I'm a Linux user and it isn't the answer for the masses as it stands now either.
        Over and Out
  • What to watch for at Microsoft's September 19 analyst meeting

    I'll be listening that day. I want to know what the future of Microsoft holds so I can prepare for it. Its best to be ahead of the curve and get in early when it comes to Microsoft.
    Loverock-Davidson
    • If find it very unlikely you'll get to listen.

      The financial analysts are bound to be asking tough questions and MJ said they were not inviting the press.

      As to know the future of MSFT,... get in early. Get into what early? They are flat out of rational ideas, or haven't you noticed? What you are saying makes sense 10 years ago, but not now.

      Seriously, look at what they are doing:
      Windows 8 failed with consumers because the just don't like Metro (this is the fourth time consumers have rejected that interface). Microsoft Plan: Bring back something called a start button, but all it does is force them to use Metro. If you pulled out Metro, Windows 8 could be a hit.

      The Surface sold breathtakingly badly. Plan: refresh the Surface. Drop the price on the old ones such that they are still overpriced.

      Numerous office suites are becoming available on Mobile devices (QuickOffice probably the best, though Apple's iWork offerings are not bad either.) Microsoft's plan... put out an incredibly weak version (even on their own hardware), that only works on Android and iOS phones, not tablets. A good office suite on those devices are like $20... to use Microsoft's app, they force you to pay $100+ a year for an online service.

      Windows 8.1 for developers offered so little (that shouldn't have been there day 1) that they only spent a few tens of seconds on it during the BUILD keynote!

      I agree you should be preparing for it... preparing to run elsewhere. [Google Chrome Packaged Apps look promising.]
      brian_st
  • I think this FAM is a limited One-Shot Deal

    One of the things in the new reorg beyond moving from a product to an engineering focus is the centralizing of the CFO and marketing functions. The most significant of which IMO is the removal of product group CFO's.

    This will impact how MS reports its financials, and how they break out (if they elect to) segment and product financial details. I believe this FAM will be a one time only event at which MS will explain the nuances of their post reorg financial reporting plans. I don't think they are going to do anything else, and all the questions bandied about here and elsewhere will prove to be irrelevant to MS's limited FAM objectives.
    eboyhan
  • One question...

    Why?
    NoAxToGrind
  • Well I for one don't really care.....

    Microsoft has failed to listen to its customers (User/Business/Corporate) and now they re getting their payback.

    We have gone to other modes of working without having to pay the Microsoft ripoff.

    And now in New Zealand we have schools changing from Microsoft to Google Chrome and Google Doc's platform, with Chromebooks for their Students.

    About time

    That will be sending a clod front down Microsoft s spine.
    carlsf@...
    • Microsoft has failed to listen to its customers?

      It is interesting you said that, as in a recent survey one of the high marks it received was for "listening to it's customers".
      John Zern
  • Who are we

    to demand, judge, ask this or that, from Microsoft? They must speak on margins, metrics, cloud, blah blah blah. Here's the truth: it's a private company, created with their bare hands by people, who own it. And will do whatever the f they want to do with it. You want something to happen at a company? Go create your own.
    Dowawado.com