Microsoft is heading towards the eye of the cyclone. It will rock

Superficial reading of Microsoft's quarterly financial results apparently blows boredom. Increases, increases, increases and above expectations of Wall Street analysts. However, I'm starting to understand where the idea for a strong exposure of the Microsoft 365 brand came from.

Started by Steve Ballmer and continued by Satya Nadella, the transformation of Microsoft into a company providing digital online services turned out to be a hit, and expressing this opinion in 2020 is practicing banalities. The company generates fantastic financial results quarter by quarter and year by year.

Microsoft is most easily perceived by its three main divisions. These make up cloud computing ( Azure ), productivity (Office and the rest) and personal computers ( Xbox , Surface , Windows). The last two CEOs of Microsoft led to the fact that these three divisions - although they work together and intertwine - are so independent from each other that if one of them fell for some reason, Microsoft would continue to function and succeed.

Anyway, see the latest financial results. Intelligent Cloud provided $ 12.3 billion revenue, Productivity and Business Processes $ 11.7 billion, and More Personal Computing $ 11 billion It's almost equal amounts. All of them also record high increases, comparing year-on-year quarters.

Such a division nicely illustrates how Microsoft perceives the market. Unfortunately, it explains its market situation a bit worse.

As long as we look at the accounting balance sheets of all divisions at Microsoft, we aptly notice that the company is doing great. Investors are delighted, the value of shares will probably rise again. In addition, these special times of the global epidemic have helped the company a bit weirdly. The Teams service already has 75 million daily active users, while only a month ago there were only 44 million.

The problem is that Microsoft's strength and power lies mainly in productivity tools. The Teams service is loud because of the pace of adoption and the success it enjoys in companies, schools, colleges and other organizations. What about consumers?

Are the media humming about how Skype - a service that popularized video calls many years ago - helps us in times of social isolation? No, the star is Zoom, preferred despite its large privacy or security issues. Often, Messenger or WhatsApp . Skype has long lost contact with the base - and thus with the hearts of consumers. Like almost everything that is not directly used for work.

Even Windows has problems in this context.

Microsoft's report shows that Windows 10 is already on more than a billion active devices and its shares are constantly growing. This was to be expected, after all, Windows 7 has just ended the period of technical support and mass transfer to the latest version is underway. The problem is that Windows is mainly - and rightly so - interested in companies. Sales of Pro licenses to companies and computer manufacturers increased significantly, but sales of computer versions to consumers ... dropped by 10%

On the one hand, the outbreak of coronavirus increases the demand for personal computers - for employees who need a home work tool, so the demand for Windows PCs is increasing. However, as Microsoft admits, in the consumer market Windows 10 faces the challenge posed by Chrome OS and iPadOS . So platforms are certainly less functional, but lighter, cheaper and easier to use.

Microsoft, moreover, has a general problem related to creating solutions that are good enough . This can be seen even on Surface devices - undoubtedly unique, great and pushing the development of personal computers forward. However, it is difficult to expect the commercial success of Surface Pro , since for three times (sic!) Smaller amount you can buy a good enough iPad .

On the consumer market, Windows 10 is irreplaceable in principle only among video game enthusiasts for whom the compromise of gaming consoles is unacceptable. It is true that even here Microsoft must share its influence with others - with the Steam platform built on Windows from Valve - but neither macOS nor any Linux provides the right ecosystem for players.

Video games are still a huge advantage of Microsoft. However, this is not exactly a measure of success on the consumer market.

I am aware that I lack the education and broader knowledge to pass such judgments - but I do not think that the video games and consumer electronics market is closely connected. In my opinion, it should be considered separately, just as we consider productivity tools separately. Shooters and word processors have little in common, just like apps for sorting photos and RPGs - the specificity of the recipient is also completely different.

Xbox successes have a negligible impact on whether we want to use OneDrive, Word or Edge. In the past quarter, the Xbox Live network recorded 90 million active users, and currently 10 million of them regularly pay for the Xbox Game Pass subscription and about half of Xbox Live Gold. Xbox One as a console will never catch up with PlayStation 4 again , it had a too weak start to make it possible. The Xbox, however, is doing very well in itself, and the Xbox Series X - although there is plenty of time to launch and we have not yet seen the games dedicated to it - enjoys a very positive response on social media.

However, Xbox has a rather special mission. In addition to being significant in itself - according to Microsoft, gaming is a forge of new technologies related to data processing, artificial intelligence or network infrastructure - it is also to be a demonstration of the strength of Microsoft's computing centers. Clearly works, since Microsoft Azure is to build its future infrastructure ... PlayStation .

Ultimately, Xbox will end up as planned as a streaming service. Fortunately, Microsoft openly says that its xCloud and similar services - although they are already running - are a distant future. Network delays mean that players will prefer to play on PCs and consoles for a long time. In the end, however, this problem will be solved, and Xbox will cease to be dependent on hardware and platform - pushing not only on Microsoft platforms, but also Apple, Google and others.

What is left for us? Office .

This is a huge advantage, no doubt. Office applications have been considered unmatched in their class for many years. The business world is almost dominated by Microsoft office solutions, but the consumer market shares look very good. Word, Excel and PowerPoint are almost market standards. Microsoft closed the previous quarter with 39.6 million active subscribers of Office 365 consumer, and the quarter-to-quarter and year-to-year increases are counted in millions.

The problem is that Office for many of us is just ... unnecessary. It's very cheap, and in the essential version it is even free, but we need a decent text, presentation or spreadsheet editor less and less often. The employer provides them for work (or themselves as part of a small business). Typically home-related matters are faster and easier to settle with much simpler tools such as OneNote, Evernote, To-Do or Things. On the consumer market, Office has real competition basically only in the Google solution package - but in general quite a small part of individual users are interested in such tools.

It is no wonder that Office 365 has disappeared - being on the consumer market completely replaced by Microsoft 365 .

The benefits of an Office 365 subscription are more than just access to extended versions of Word, Excel and PowerPoint. It is also a terabyte of memory in the excellent OneDrive cloud, so a space that is long enough for us for documents and photos, as well as a lot of smaller additions. I even think that terabyte OneDrive is the main benefit of an Office 365 subscription - Word, Excel, PowerPoint and the rest I even consider as a free cloud add-on. Microsoft seems to be beginning to understand this point of view.

Microsoft 365 - and thus Office 365 under the new name - is likely to deepen consumer relationship with Microsoft. First, by clearly displaying the brand. Even when looking at the bank statement, we will - as subscribers - see fees for Microsoft services , not for the office package (which of course remains part of it).

Microsoft 365 for today is:

• Outlook (mail, contacts, calendar)
• OneDrive (cloud storage)
• Word (text editing)
• Excel (spreadsheets)
• PowerPoint and Sway (presentations)
• OneNote (notes)
• To-Do (task list
• Skype (text messages, audio and video calls, digital telephony)
• Access (database)
• Flow (task automation)
• Publisher (brochure and publication design)
• Bing (search)
• MSN (news and weather)
• Parental Control
• Edge (web browser)
• and soon Teams adapted for individual users will join this set.

Stereotypically associated applications and services are here in the minority. Did you know about some of them? As well informed Spider's Web Readers - probably yes. However, I'm sure many of your friends have no idea about them, even if they pay a subscription for Office 365.

They are all also independent of Windows, and some of them are free and do not require payment of a Microsoft 365 subscription, although they belong to this family. All this to make Microsoft as much as possible in our digital life - which undoubtedly involves more than just office tasks.

The 40 million users of Microsoft's 365 Office 365 are a real picture of Microsoft's strength in the consumer market.

Because these users are not with Microsoft by accident - for example, using Windows mainly to pay Steam for video games. Every month, they knowingly deduct the appropriate amount from their account. This, though small, is probably the best measure of commitment. I don't consciously add Xbox Live users on consoles, PCs and mobile devices - I invariably consider them to be a completely different group of customers.

40 million, although this number is larger than that of Polish residents, it is not so much. The growing popularity of cheaper home computing devices such as iPads, phones with large screens and even Chromebooks is something that Microsoft has no direct answer to. The Redmond giant has an excellent offer for companies and all working people . However, we have other needs.

In the face of the impending imminent economic crisis, hardly anyone will be able to afford expensive Surface devices or their equally expensive clones from Microsoft partners. Windows is not needed for the home user, if the computer does not do any serious work. With the thinning of our wallets, the demand for iPads and Chromebooks will only grow - at the expense of expensive PCs with Windows. And Office is not for everyone.

Microsoft 365 is clearly a way to reverse the trend. No matter what you use and who produced this device - useful, refined, comprehensive and cheap Microsoft services are always to be with you. Not specifically attached to any particular operational platform.

It's a game for the future of the entire company. Microsoft does not have to worry about it, but Microsoft 365 success (or lack of it) will decide whether the giant from Redmond will become the second IBM, Dell or Oracle - with an anomaly in the form of gaming Xbox - or will the company maintain on the consumer market. Looking at the numbers, I can't find another explanation. And I am convinced that it will not be easy.

Microsoft is heading towards the eye of the cyclone. It will rock