WEBVTT - Bloomberg's Rana on Microsoft Boosted By Cloud Revenue (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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<v Speaker 1>I'm Charlie Pellett. Moments ago Microsoft report had profitence sales

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<v Speaker 1>that topped anile as estimates, lifted by an aggressive push

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<v Speaker 1>into Internet based software and services for businesses. Fiscal fourth

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<v Speaker 1>quarter revenue, including some adjustments, twenty two point six billion.

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<v Speaker 1>That compares with the average analy assessment for twenty two

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<v Speaker 1>point one billion dollars. The now climbing to a record

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<v Speaker 1>eight in a row, up twenty five points to eighteen thousand,

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<v Speaker 1>five hundred fifty nine, up one tenth of one percent,

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<v Speaker 1>SMP five hundred index down three to sixty three, a

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<v Speaker 1>drop there of point one percent. The old on the

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<v Speaker 1>tenure one point five five percent, up today by eight

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<v Speaker 1>thirty seconds, and gold up three fifty ounce to thirteen

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<v Speaker 1>thirty to a barrel UH announced uh it is hired

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<v Speaker 1>by three tenths of one percent. As for Barrel's crude

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<v Speaker 1>oil down sixty four cents forty four sixty for West

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<v Speaker 1>Texas Intermediate, a drop there of one point four percent.

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<v Speaker 1>I'm Charlie Pelt. That's a Bloomberg business flash. You're listening

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<v Speaker 1>to taking stock with bim Box and Kathleen Hayes on

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<v Speaker 1>Bloomberg Radio. Shares of Microsoft are higher right now by

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<v Speaker 1>more than one and a quarter percent. This comes after

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<v Speaker 1>the tech giant said that it earned sixty nine cents

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<v Speaker 1>to share on revenue of twenty two point six billion.

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<v Speaker 1>Analysts were just looking for the company to earn fifty

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<v Speaker 1>eight cents to share on revenue of twenty two point

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<v Speaker 1>one billion. Here to tell us more about Microsoft A

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<v Speaker 1>rag Rana. He is a senior analyst Software and I

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<v Speaker 1>T Services for Bloomberg Intelligence. Bloomberg Intelligence provides unique real

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<v Speaker 1>time research and context on a variety of industries and

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<v Speaker 1>all markets and government factors that affect business. Our terminal

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<v Speaker 1>customers can access this function at b I go on

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<v Speaker 1>a rock. Thank you very much for coming in. Tell

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<v Speaker 1>us a little bit about the details of Microsoft's report.

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<v Speaker 1>I'm thinking cloud my my on the right track here. Absolutely.

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<v Speaker 1>You know. Cloud Asure was up hunted in eight percent,

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<v Speaker 1>which is something we've been This is the cloud computing

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<v Speaker 1>division of Microsoft. It's the infrastructure as a service for

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<v Speaker 1>for Microsoft. We saw this yesterday also with vm D

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<v Speaker 1>and and you know IBM to certain effect that Brexit

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<v Speaker 1>vote has not impacted enterprise software spending at this point.

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<v Speaker 1>And with Microsoft today we see again that you know,

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<v Speaker 1>spending has been relatively healthy compared to the you know,

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<v Speaker 1>the huge volatility we saw across global markets. As far

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<v Speaker 1>as the cloud division goes, does this mean that all

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<v Speaker 1>cloud services are enjoying major popularity because I note that

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<v Speaker 1>whenever we look at the results of Amazon, we always

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<v Speaker 1>end up talking not just about retail but about those

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<v Speaker 1>cloud services. That has been the trend for the last

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<v Speaker 1>few quarters. And what we have seen, in fact in

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<v Speaker 1>the last two or three that has been an acceleration

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<v Speaker 1>in the adoption of cloud services, which we see across

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<v Speaker 1>not just with Amazon. We also see it in IBM

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<v Speaker 1>cloud division. Yesterday they reported articles cloud services they're also

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<v Speaker 1>doing very well. So as companies move their ID infrastructure

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<v Speaker 1>from legacy servers to to to to the cloud, you

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<v Speaker 1>will see a lot of these companies benefit from that.

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<v Speaker 1>Tell us about mobile technology and Microsoft, I have to

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<v Speaker 1>admit that I got all this information from reading your

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<v Speaker 1>Bloomberg Intelligence piece about Microsoft. Well, you know, as as

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<v Speaker 1>we know, they have d emphasized phones. So the phone

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<v Speaker 1>numbers were weak this quarter, as we expected. We are

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<v Speaker 1>seeing a lot of their productivity applications that run on

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<v Speaker 1>mobile devices they have done well and that's you know,

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<v Speaker 1>that has been a trend for the past several quarters.

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<v Speaker 1>Linked In the acquisition of Lincoln what what will that

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<v Speaker 1>do to Microsoft's disposition as a cloud company but also

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<v Speaker 1>as someone as you just described as uh, someone looking

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<v Speaker 1>to try to generate new revenue. See, Microsoft wants to

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<v Speaker 1>be relevant in the cloud world, and they have a

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<v Speaker 1>very good portfolio of services in the in the case

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<v Speaker 1>of infrastructure and platform. The software is a services where

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<v Speaker 1>they have lagged companies like Salesforce or work Day and

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<v Speaker 1>you know, we would we still need to see them

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<v Speaker 1>to talk about what new products are going to come

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<v Speaker 1>from this combination of Microsoft and LinkedIn, of whether it's

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<v Speaker 1>going to be something of a of a sales channel

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<v Speaker 1>or something of a you know, in a software that

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<v Speaker 1>is online based that can help them breach that gap.

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<v Speaker 1>Microsoft's cash balance, you note is over a hundred billion dollars.

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<v Speaker 1>They're going to spend some of that, well, they's just

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<v Speaker 1>spend someone LinkedIn. So it's right, is that but is

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<v Speaker 1>that likely. I mean, do they need to be buying

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<v Speaker 1>let's say, cloud computing services in order to add to

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<v Speaker 1>their portfolio. See, the cash balance is very strong for

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<v Speaker 1>a lot a lot of these tech companies. But but

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<v Speaker 1>at the same time, it's sparked outside the US, so

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<v Speaker 1>they might have to borrow money to in order to

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<v Speaker 1>buy something. But you know that has been the case

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<v Speaker 1>for a lot of these companies that if there is

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<v Speaker 1>a whole in in their portfolio, they can use it,

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<v Speaker 1>use this cache to to plug that. You've previously written

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<v Speaker 1>that Microsoft's server products grew just five in the fiscal

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<v Speaker 1>third quarter. You also mentioned that pressure on the personal

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<v Speaker 1>computer growth is affecting Microsoft's obviously software sales, even though

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<v Speaker 1>the surface tap is doing pretty well. Yeah, but both

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<v Speaker 1>those numbers were actually better than expected in this in

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<v Speaker 1>this particular quarter, right, server products and you know cloud

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<v Speaker 1>services were up eight percent, So that's you know that

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<v Speaker 1>turned the other way. PC shipments, according to I d

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<v Speaker 1>C in this quarter were not as bad as they

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<v Speaker 1>would they expecting it, which I'm suspecting must have helped

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<v Speaker 1>a lot portion of their you know, Windows, O, E, M, Business, etcetera.

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<v Speaker 1>And one of the comments I read was their their

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<v Speaker 1>mix was towards the higher end products, which is similar

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<v Speaker 1>to what you just mentioned the surface one, which is

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<v Speaker 1>what drought drove some of the revenue. Talking about higher

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<v Speaker 1>margin products, legacy products at Microsoft, don't they have higher

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<v Speaker 1>margins than the cloud business. Yes, but that's because they

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<v Speaker 1>are investing a lot more in cloud right now. So

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<v Speaker 1>so as as that gate scale, as you see the

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<v Speaker 1>benefits of that, you can expect margins of those cloud

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<v Speaker 1>products to improve this. But have at things like licensing

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<v Speaker 1>revenue for commercial PCs as well as server products. Do

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<v Speaker 1>we need to watch those as well? Yes, But at

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<v Speaker 1>the same time, you know, when you have an enterprise

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<v Speaker 1>license agreement or a newity business UM, you will see

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<v Speaker 1>some of that, you know, is not as volatile as

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<v Speaker 1>some of the transactional revenue, and which is when you know,

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<v Speaker 1>when we mentioned about the turbo products, they actually did

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<v Speaker 1>better than expected. And the Windows ten roll out, I

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<v Speaker 1>mean that continues to see what strong adoption. It has

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<v Speaker 1>seen some strong adoption, but I think that the PC

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<v Speaker 1>ship and data shows that maybe you know, it's the

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<v Speaker 1>Windows tent is helping PC ship makers PC makers to

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<v Speaker 1>UM you know, be able to get this refresh cycle

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<v Speaker 1>that has been lagging for a while. I want to

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<v Speaker 1>thank you very much for coming in and sharing your

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<v Speaker 1>thoughts of Microsoft shares right now are up more than

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<v Speaker 1>one and a half percent after reporting better than estimated

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<v Speaker 1>earnings and sales on a rug rona. Thank you very

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<v Speaker 1>much of Bloomberg Intelligence senior industry analysts. Of course, Bloomberg

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<v Speaker 1>Intelligence providing unique in real time research on a variety

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<v Speaker 1>affect businesses. Our terminal customers can access this function at

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<v Speaker 1>b I Go. I'm pim Fox and this is Bloomberg

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