Microsoft Financial Analyst Meeting: Live from Build

Microsoft Financial Analyst Meeting is being held at its Windows 8 Build conference. Surprisingly, the line-up doesn't have any Windows, Phone or Xbox execs.
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft is holding its annual Financial Analyst Meeting (FAM) for Wall Street analysts at its Build conference in Anaheim on September 14. I'm here at the meeting and will be updating this blog post for the much shorter-than-usual duration (from 1 pm PT to 3 pm PT). Refresh my site to see the latest updates.

If you want to watch from home, here's the live webcast.

The line-up for today's FAM is:

  • Bill Koefoed General Manager, Investor Relations
  • Kevin Turner, Chief Operating Officer
  • Peter Klein, Chief Financial Officer
  • Qi Lu, President Online Services Division
  • Satya Nadella, President Server and Tools Division
  • Steve Ballmer, CEO

No execs representing Windows, Phone or Xbox today, though there will be some talk on those topics, no doubt. I'm expecting more Bing, search, big data and cloud talk.

1:12 PM: Koefoed is up. Reading the bullish Boy Genius Report look at the Windows 8 Developer Preview . Loving the "post-Post PC era" line.

1:18 PM: Koefoed revisiting the FY 11 results. FY 11 for Microsoft ended on June 30, 2011.

1:23 PM KT (Kevin Turner) is up. Talking about operating momentum and where Microsoft is going in the coming year.  Emphasizing the diversification of Microsoft's businesses as a key strength -- Office, SharePoint, Dynamics, etc. Server and Tools growing as bigger and bigger percentage of the pie. Also new shifts in customer mix -- both at high and low ends (enterprise and SMB).

1:28:  Operational excellence -- and software -- are what MS is all about, KT says.  Revenue per head is now $774K (in FY 11).

1:31: SharePoint shout out by KT. "It's the Facebook for the enterprise."

1:34:  Private cloud, public cloud and hybrid cloud. "We provide a cloud that's right for every customer."

1:37: April 2014: XP end of life. KT reemphasizes MS goal of driving Win 7, Office 2010, and IE 9 refreshes with its customers in its current FY.

1:42: Embracing the consumerization of IT. Four pillars: 1. Windows 8 and Win Phone 7.5; 2. Windows Intune and System Center 2012; 3. Office 365 and cloud apps; 4. Unified app development: .Net, VS, IE 9 and HTML5.

1:44: KT: Bing: very focused on still growing our share. Winning in the cloud against Google Apps and Docs; VMware compete; SQL Server Denali -- almost half the price of Oracle and IBM with more features and functionality;

1:47: Businesses, consumers, advertisers and shareholders: Those are Microsoft's key audiences (in case anyone had any doubts)

1:47: Peter Klein, CFO, up now. Topic: "how does Microsoft create value?" Focus on large markets with growth potential, integrated products, etc. Markets we compete in are going to double by 2015: PCs, tablets, phones, productivity, business infrastructure, online advertising and gaming.

1:52: What's driving the doubling in PCs and tablets? New form factors, emerging markets, opportunities to reduce piracy. In phone? Device diversity; multiple price points (no mention by Klein, but hello, Tango!); partnerships (ecosystems); services. In Office: SharePoint, Exchange and Lync are all growth platforms; Office familiarity is supporting Dynamics growth; productivity tools coming to devices (and not just MS devices); and brand- new customers coming to Microsoft through Office 365. In business infrastructure? Cloud-optimize new offerings (like Win Server 8), creating a bridge from private to public cloud; explosion of data (big data) lets us drive premium editions; and public cloud and its massive economic impact. Integrated System Center management tools.

1:57: Online advertising? Need to continue to grow our search share and improve our monetization and profitability. Xbox? Continnued console share (not just from hard core gamers), Kinect and other add-ons.

2:06: Qi Lu, head of online services is up. Talking about how they plan to grow search. Mention of Yahoo and how search quality is also improved because of the two combining forces. Acknowledges there have been problems (as the two have acknowledged via Microsoft making extra payments to Yahoo). Will add more partners as they move forward. Platform capabilities in adCenter and more cloud services are key. Ad platform will help MS build ad business, which fuels other growth.

2:09: Lu talking more about search quality being on the same baseline as its competitors (meaning Google, obviously). Searches are faster, he claims. We have horsepower to innovate at a very fast pace. To win in search, need to break through where we are, but also need to change the game fundamentally. When the structure of the Web starts to change, things will change. Search is the consumer gateway to the cloud. How search gets done is largely governed by the deep infrastructure of the Web. Today, that's about user keywords and keyword index. Need to better understand the user and understand the Web.

2:14: Today it's a topical Web. You can't use verbs to navigate. (Lu is revisiting this idea that Ballmer and others have talked up, re: natural language querying improvements coming to Bing and will be coupled with voice search.

2:15: What FaceBook has done is profound. Activity streams, profile pages -- these things are now informing the way information is organized and will be searched. Helping users discover more information. Our partnership with FaceBook allows creation of new experiences. Geo-spatial advances are helping better connect things together and improve search accuracy. The appification of the Web -- different apps on different form factors -- this is a place where Microsoft assets gives us an advantage.

2:19: Need to build new foundational computational capabilities -- helping us understand intentions of human beings. (More natural language query stuff from Lu). Also need to build computational fabric and knowledge about people, places and things. Can search different ways using voice, camera on different products from Microsoft.

2:24: Satya Nadella, head of Server and Tools now up. Talking about the business, the products and business model transformations. Our mission is to cloud optimize every business. Deep and broad platform across public and private cloud. Today we talked about Win Server 8. Every customer going to have multiple data centers in private and public cloud.

2:31: System Center and app management is key, as is virtualization. With virtualization, we start with app first. Making sure our workloads --SharePoint and Exchange -- are going to perform best on our Windows servers. On data platform side -- we are growing faster than the database market, due to our strength in business intelligence. Capitalizing on data coming to the edges. With Denali, next version of SQL Server, going to capitalize on this. We'll have first. Extensibility of our products  -- Office 365 and point products making up the suite -- are coming through Azure.

2:41: Nadella talking about customer wins. I am taking a mental health break on this part. (time for some water!)

2:42: Yay. Here's Steve Ballmer. This is the shortest or longest FAM (since some of the Wall Street folks came yesterday for Windows 8 keynote), depending on how you look at it.

2:46: Transition to cloud is early, but very big impact on Microsoft transition and business models.

2:47: Windows is at the center of our strategy. Some may not think this is a good idea; we do. We have to reimagine and change Windows but no reason not to build on the application and brand strength of Windows. Windows 8, Windows Live, Windows Phone, Windows Server, Windows Azure. We feel very comfortable this is a smart thing for our customers and for our shareholders.

2:48: Six things are different about us vs. competitors: Windows centricity; new hardware and form factors from our ecosystem of partners in phone, datacenter, PC worlds; natural interface (voice, gestures, touch for overall user intent); cloud (public, private, hybrid); focus on both enterprise and consumer; first-party applications -- everything from Office, to Dynamics, to Halo.

We are a little broader than others in our industry, but really focused on seven things: Windows, Windows Phone, Xbox, Windows Server and Azure, Office, Bing, Dynamics. Zune was important for us to build out to power some of our devices and services, but lots of opportunity in these seven areas.

2:55: Ballmer is going to talk more about Office. Notes the Dynamics business took a while to get its mojo, but now has momentum: CRM Online, Dynamics AX 2012, etc.

2:56: Windows Phone: The product we put in the market, positive perception from those who bought, the excitement from hardware partners; IP issues all make it interesting. Putting our second release out within a year. Not saying I love where we are, but very optimistic about where we could be.  Good shape to be a very strong third ecosystem. Nokia is a dedicated hardware partner that's all in with us on Windows Phone. They are totally dedicated with us -- not doing other things like Android.

2:58: Office is the biggest business that didn't have its own break out today. Office is our biggest business. It's growing rapidly. Office 365 is one of the biggest quiet opportunities in the Microsoft portfolio. The cloud is an important part of how we break into China, reach smaller businesses, move into new scenarios (note taking, voice, video). Lync is our hottest thing we have going with enterprises right now.

3:01:  A Lync demo on PCs, mobile phones and large screens too. Showing the conversation translator add-in that relies on the Bing Translation service. Reiteration that the phone clients for Lync are coming for Windows Phone, iPhone and Android phones all before the end of calendar 2011.

3:07: Lync is great for talking to folks inside your enterprise. But one of the scenarios most interesting to compete is consumer to consumer, consumer to business, and business to business. Need to be able to open up to family, professional contacts, suppliers, etc. Real-time conferencing, voice and video are not new to us, but wanted to drive scenarios in this area much harder. In next five years, real-time conferencing and video going to explode. Strong proposition to connect Xbox Live, Skype, Messenger, users.

3:10: Revenue for Skype was $860 million in revenue and growing 20% year over year. 170 million connected users and 600,000 new registrants daily. Expect to close out regulatory process in Europe in next several months.

3:11: Previous FAMs, we talked a lot about Xbox 360. Ballmer reiterates MS repositioning Xbox for a broader demographic. It is No. 1 intelligent device connected to TVs around the world. Will have announcements over next several months about what you can do with Xbox and Kinect. New scenarios: Kinect, Avatars, Bing voice search -- bringing together intelligence and intent.

3:14: Bing and Xbox demo. You know, how you can talk to your Xbox and search by voice. We've seen this one before.... "We're trying to give the TV a voice... You're own voice," SteveB says.

3:19: The voice-controlled Xbox demo is sort of working. Even Ballmer's booming voice can't triumph in some cases...

3:20: Now onto Live TV. This year we're bringing live television to the Xbox with same kinds of navigation capabilities enabled. Sounds like carriers outside the U.S. are the first ones who will bring this to their users (France, Australia). This involves the rumored Orapa project that fuses Mediaroom IPTV and Xbox Live.

3:23: Now time for audience Q&A. Only the financial analysts are allowed to ask questions. Us press folks, sequestered in the back, aren't allowed to ask. Windows Chief Steven Sinofsky is now added to the group of folks who presented on stage, ready to answer.

3:26: Q: About Office 15 and how it will play with the Metro UI. Ballmer: We are thinking hard about what it would mean to do Office (15) Metro style.

3:27: Q: About ARM running legacy apps. Sinofsky: We've been clear that Metro style applications will automatically support ARM or x86. Want to encourage folks to think about this: There are different ways we could have gone. The role of an OS is to abstract out hardware for software developers and let unique value of that hardware shine through. But the challenge is interesting: If x86 Desktop apps are allowed to "port," there are challenges around battery life, etc. Then it becomes easier to also port viruses and malware, too, he notes.

3:34: Sinofsky talking about ability to develop right on the tablet is key to WIn 8 developers.

3:40: Q: Consolidation of OSes? Will phone and PCs really run one OS? (Man, this is a question everyone would love to get a real answer to!) A: Sinofsky: For next couple years, just focused on Win 8 stuff we showed (this week). If you are a developer and want to share code between Win Phone 7.5 and Windows 8, you can copy and paste and share a lot of code. From a product design challenge, still challenges with different sizes of those screens. But that said: Sharing code between Windows and Phone is growing. WP7 used the Windows graphics engine. Then IE 9 was available on both. Code changes are available to the phone team, too. And there are more Windows Live ID commonalities allowing you to share services across PCs and devices.

Me: OK, that was sort of an answer -- it's definitely moving closer to being a common code base. We still don't have an official answer as to when Windows Phone will switch from the Windows Embedded Compact kernel to Windows kernel.

3:47: Q: about what happens if Yahoo is sold to the Microsoft-Yahoo search partnership. Lu says the contract will stay in tact. Ballmer says hundreds of millions of people will still use Yahoo services, regardless of a change of management.

3:49: Q: One analyst says he likes that Microsoft gave out tablets to attendees. But "what about a couple hundred more" for the analysts here? Laughs from the panel (and probably some regrets if they aren't giving them out to the attendees as they head out today as their "parting gifts") Nope: No guidance, no tablet!

3:56: Sinofsky: Will focus on having a clean upgrade from Windows 7 to Windows 8. Ballmer: We'd welcome Windows 8 apps from Amazon, even Apple, with iTunes.

4:00: That's a wrap. Off to cocktail hour! And the Build Blogger Bash!

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