Microsoft has overhauled its financial reporting structure to go along with its “One Microsoft” reorganization. As expected, the new approach appears to make it tougher to discern the performance of individual Microsoft product lines such a Windows and Office.
As detailed in this SEC filing and the chart above, the company will lump a variety of products together into five new reporting segments. On the consumer licensing side, for example, revenue from Windows, Windows Phone, Office and patent licensing will be combined into one segment for purposes of financial reporting.
The company could still give additional detail about specific products as part of its earnings reports and regulatory filings, but going strictly from the financial statements, the changes make Microsoft’s results more opaque. The Microsoft chart below shows what the company’s results would have looked like in fiscal 2012 and 2013 if the company had been using this structure at that time.
At the same time, the addition of a hardware segment demonstrates how different the company is becoming as it expands into hardware — and how difficult the hardware business is compared with the enormous profits from software. The profit margins in that hardware category are tiny when compared with the margins in the software business. This will become even more pronounced as the Nokia acquisition goes through.
Welcome to the new Microsoft …
More coverage of Microsoft’s Financial Analyst Meeting:
