- Former Microsoft executive Ben Slivka told Businesshala that the company should phase out Office and Windows, both of which enjoy market leadership.
- The company has sold some assets in the past, including the Nokia feature-phone business.
- But Windows and Office are highly profitable and have helped other parts of Microsoft’s business.
According to former executive Ben Slivka, Microsoft should spin up its Windows and Office franchises to fuel its cloud-computing effort.
“It’s probably the right thing to bet on the future of the cloud,” Slivka, former general manager of Microsoft’s consumer and commerce group, told Businesshala in an interview.
The Azure cloud infrastructure, which organizations use to power applications, has become a star inside Microsoft as it faces the toughest competition to market-leading Amazon Web Services. The rapid growth of the Azure unit has prompted investors to support the company in the modern era, decades after it became dominant in operating systems and productivity software. Microsoft stock rose 51% in 2021, compared to about 27% for the S&P 500 index.
Slivka, which no longer owns Microsoft stock, said it would not want internal conflicts to get in the way of further development of Azure. He cited Microsoft’s history in manufacturing mobile devices, where the company failed to surpass Apple and Google as smartphones took hold.
“People running Windows businesses put people with mobile OS in a box and constrained what they could do,” he said. “They had their own little Start button and all this other bull—-. Microsoft rebooted its mobile strategy three times. In the end cell-phone makers and developers gave up.”
Microsoft in 2015 wrote down $7.6 billion in assets related to its acquisition of Nokia devices and services for $9.5 billion. The company stopped supporting Windows 10 Mobile in 2019 after the company’s market share slipped below 1%,
Microsoft has been willing to part with its smaller share of business in previous years. The company offloaded Bing mapping assets to Uber in 2015. In 2016 it agreed to sell Nokia feature-phone assets to Foxconn and HMD Global. for $350 million, and it spun out the imagery company Vexcel.
Slivka formed the Internet Explorer team after joining Microsoft in 1985 and left the company in 1999. “I understand how important Windows is to Microsoft,” he wrote 1997 email For Microsoft co-founder and former CEO Bill Gates, that became a government demonstration in the US Justice Department’s antitrust case against Microsoft.
He added that the company is “not dying tomorrow” and does not need to prepare for an impending transaction.
However, some analysts seem to agree with Slivka’s view.
Windows and Office continue to enjoy leadership positions in their markets today, and those products help draw customers to Azure. In its latest annual report on the market, technology industry researcher Gartner said that large companies go with Azure after building trust in Microsoft over the course of several years.
“The goodwill that Microsoft has built up over time still presents a very attractive future for Azure,” Wells Fargo analyst Michael Turin said in an interview. “Part of me says that Office has also ditched productivity, and there’s also a lot of power in keeping those things together.”
Plus, investors would love to be able to invest in a more streamlined public-cloud company, he said. For example, many in the tech industry and Wall Street have speculated about Amazon, although the company has repeatedly said it has no plans to do so.
Turin projected that Azure would surpass AWS in market share in 2028, beginning Microsoft’s coverage in a November note that would equate to a buy rating. Turin assigned a market value of $3 trillion for the entire company at the end of 2023. He said that Azure alone would be worth $1.5 trillion, and he says the division, like AWS, is profitable.
Wells Fargo revealed plans to use Azure as well as Google’s cloud in September itself. Microsoft’s Chief Commercial Officer, Judson Althoff was quoted as saying in a Statement That the software maker has a “longstanding relationship” with the 169-year-old Wells Fargo.
The departure of Windows and Office will have a major impact on Microsoft’s position. More than a third of the company’s revenue in the third quarter came from Office products and cloud services, and Windows.
They are also highly profitable. Analysts at UBS in November estimated that if 12% of Microsoft’s total revenue would come from Windows, it would contribute about 17% of the company’s overall gross margin. Microsoft has been boosting Azure’s gross margin for years, but analysts agree it’s not coming close to Windows’ levels just yet.
Microsoft declined to comment.
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