Microsoft's latest earnings report shows Nadella is the best person to run the company. Both investors and employees look to success as a key metric in leadership competence, and stunning success, in their minds, should mean equally stunning capability. That's critical if Nadella is going to get his people to follow his direction better than they followed his predecessor, Steve Ballmer.
Last week, Microsoft delivered its quarterly report, and it was a big deal. It was CEO Satya Nadella's first real quarter and the Nokia merger was completed.
This is just the beginning of the Microsoft makeover, but two things indicate that in the end, Ballmer finally did what was right for Microsoft in prepping the company for Nadella -- and Nadella was validated as the right choice to lead the firm.
I'll walk you through this and close with my product of the week: the Insteon Home Automation system.
Microsoft Financials
The interesting part of the Microsoft financials is that most of the news out of the divisions was good news. The company's earnings were down, but largely because incentive programs that pushed revenue last year weren't in place this year. Yet it performed better than anyone expected.
Cloud offerings Office 365 and Azure were up, but Azure was the product to watch most closely, because that's the product area Satya Nadella was running before he took over as CEO. That group was in the 100 percent growth category. That's amazing performance -- and given that Azure is likely a good deal of the future for Microsoft, it validated the decision that Nadella was the best person to run Microsoft.
Both investors and employees look to success as a key metric in leadership competence, and stunning success should equal, in their minds, equally stunning capability, which is critical if Nadella is going to get these people to follow his direction better than they followed his predecessor, Steve Ballmer.
Considering that Nadella is still only a few months on the job, these financial results -- including Azure -- are testament to the team Ballmer left for Nadella, showcasing that he left the company better than he found it, and gave Nadella a boost Bill Gates never gave to him.
In short, Ballmer learned from his experience and didn't repeat Gates' mistake, by ensuring that Nadella would hit the ground running rather than floundering, as he had. That's a huge accomplishment, and combined with Nadella's far stronger competence as a software/services subject matter expert, this bodes well for Nadella's Microsoft.
The Nokia Factor
Nokia joined Microsoft last week as a formal part of the company, but it left behind several of its manufacturing components. What that suggests is that going forward, it likely will use more contract manufacturers, as pretty much everyone else does. That should lower Microsoft's costs associated with phones and allow it to better take advantage of some of the economies of scale the other firms benefit from.
What will be interesting is what happens between the Surface and Nokia tablet lines. I actually think the Surface Pro should survive as a stronger laptop/tablet hybrid, while Nokia's 2525 should replace the Surface 2 as the better tablet/laptop.
That's because the panoramic screen the Surface uses, along with the Intel Core processor, works better in laptop mode, making the Surface Pro better at being a laptop, while the iPad-like portrait measurements of the 1520 position it better as a tablet. The ARM (Qualcomm Snapdragon) processor also speaks to that capability.
Nokia Joins Microsoft substantially leaner, and the end result should be a more powerful offering. Its hardware, coupled with a stronger OneDrive, Office and Azure back end, should result in a far better alternative to Android and the iPad.
Apple's financials showcased that the iPad is weakening in the market, which makes the timing right for a newly focused Microsoft effort.
Wrapping Up
Microsoft's strong financials and what it now has with Nokia devices on board makes it far more ready for what's to come than it has been in a decade. While it clearly isn't out of the woods yet, this combination, along with renewed confidence and what appears to be a weakening Apple, should be enough to put it back into the mobile game and better block inroads by corporate competitors.
Last week was a good week for the firm, and after what seems like nearly a decade of bad weeks for Microsoft, that is a big deal.
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