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In a recent article summarizing the tenure of Steve Ballmer as Microsoft's CEO, I noted that despite the frequent criticism he has endured, Ballmer had done a lot of things right at Microsoft. While there is no question the next Microsoft CEO faces some big challenges going forward, the company still has some substantial strengths as well. Here are are a couple worth highlighting:


One of the criticisms of Microsoft is that they are overly reliant on PC revenue, and that because the "PC is dead" or that we have entered a "Post-PC mobile era", Microsoft is doomed to gradual decline. I believe the premise of this argument is wrong and that there is a fair amount of hyperbole involved here - the PC is not dead and we are not now in the Post-PC era. Rather, we are in what could be better described as the "PC-Plus era". 

What I mean by this is while consumers are indeed moving heavily to tablets and smartphones, within the enterprise, the PC is still the workhorse. While mobile BYOD is certainly a trend, I'd venture to say that the vast majority of enterprise employees do not rely on tablets alone for their work. 

Furthermore, IT departments in larger enterprises tend to be rather conservative in certain ways, and it is just not realistic to expect them to tear up their entire infrastructure based on Office and start from scratch on a competing technology like Google Apps. Indeed, Office holds approximately 95% share in the productivity suite market, and I suspect that despite Google's efforts with Google Apps, Microsoft will continue to remain dominant with a market share of at least 90%.

2) Second, many people tend to overlook that Microsoft HAS invested in a number of 'next-generation' initiatives, that they are rapidly growing into billion dollar businesses. Just to take an example, consider Microsoft's Cloud business. Their Azure Cloud IaaS offering just passed $1 billion in annual revenue, and while AWS is still the clear market leader in this sector, Microsoft's Azure business should continue to grow rapidly.  Likewise, if you look at Office 365 as being part and parcel of Microsoft's Cloud offering - which Microsoft does - then that is another business with a billion dollar run rate that is growing like crazy.

Another market that Microsoft has quietly made huge gains in is the enterprise Virtualization market. While VMWare still owns the largest market share, as the Wall Street Journal noted, Microsoft has now climbed to second behind VMWare, with it's HyperV installed on 27% of new severs in 2012.

More broadly, the overall business unit under which Microsoft's Cloud and Virtualization come under - it's Servers and Tools unit - is emerging as a huge growth driver for Microsoft with a yearly run rate of approximately $19 billion. Just to take one example of how well this business is doing, Microsoft's recent data sheet for it's upcoming  Windows Server 2012 R2 product indicates a 28% price increase over it's previous version, which certainly seems to indicate a product that is in extremely high demand.

As our favorite Microsoft blog - All About Microsoft by Mary Jo Foley  - recently pointed out, within Microsoft's Severs and Tools unit, there are six $1 billion dollar businesses in and of themselves:
  • Windows Server
  • System Center
  • SQL Server
  • Visual Studio
  • Desktop access business (remote desktop services/desktop virtualization)
  • Enterprise services business (consulting and support)
Again, while it is still more then fair to say that Microsoft faces significant challenges - particularly in regards to it's mobile strategy -  let's also note Microsoft's strength in the enterprise and realize that Microsoft continues to possess significantly strengths and will likely continue to grow both it's revenues and profits for at least the next several years. Indeed, Microsoft is so strong across a diverse number sectors, that it is simply impossible to envision the company facing obsolescence the way so many predict. 

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