Kevin Turner, Microsoft’s chief operating officer, made the opening remarks at the company’s Financial Analyst Meeting in Bellevue, Wash., this afternoon — giving a broad overview of the company’s business.
“While this business faces some headwinds in the PC market … we have an incredible transition that’s under way,” he said.
One of the early points Turner made was that the company has a more “balanced and diverse” business than people might expect — as evidenced by the fact that Windows actually isn’t the company’s largest line of revenue. In fact, it’s third, as demonstrated by this slide above, shown by Turner during his remarks.
This is notable, but it actually isn’t new. The Microsoft Business (Office) Division surpassed the Windows Division in revenue in 2011, and the Server & Tools Division moved into the No. 2 slot in 2012.
What the slide doesn’t show is that operating profit in the Windows Division actually fell last fiscal year, to $9.5 billion, from $11.5 billion the year before. This is the fundamental transition taking place in Microsoft’s business, as the company shifts from the extraordinarily high profit margins of a pure-play software venture to the lower margins of a “devices and services” company — making and selling its own Surface tablets, in this case.
Put another way: Not only is Windows becoming a smaller percentage of Microsoft’s revenue, but Windows’ profits are declining, as well, not only as a percentage of the revenue but also in raw numbers.
Turner went on to highlight momentum across a range of areas, including online services such as Skype and subscription products such as Office 365. His full deck is available here.
The webcast crashed toward the end of Turner’s talk, due to a power outage at the venue, and the company says it’s taking a break to restore the feed.
Stay tuned for more from the event when it continues, but don’t expect any news on the CEO front: CFO Amy Hood made it clear at the outset that the company wouldn’t be making any announcements today about Steve Ballmer’s successor.