Microsoft Corporation (NASDAQ:MSFT) Q2 2015 Earnings Conference Call - Final Transcript
Jan 26, 2015 • 05:30 pm ET
Thank you. We will now be conducting a question-and-answer session.
(Operator Instructions) Mark Moerdler with Bernstein.
Amy, can you give us a bit more details on what's driving the increase in cloud margins within the commercial other segment as well as any sense for how accretive the cloud is becoming? And then I have a follow-up question.
Sure, why don't I talk a little bit about that from a math perspective and I'll let Satya add from some more engineering improvements, which I think are important.
Mark, as I talked a bit about, we've seen a mix shift as we have moved Office 365 and Azure to our premium service and to premium SKUs within our cloud environment, that is one of the drivers that helps improve margin growth.
In addition, we've done a lot of hard engineering work I believe over the past six quarters to be able to take advantage of more utilization and capacity over time and I'll let Satya maybe add a little bit technically.
Overall, the shift to the higher layer services is the real driver here, which is obviously Office 365 and its various levels is one factor. The other one is what I talked about in the Enterprise Mobility Suite, that's really got fantastic momentum in the marketplace because the solution has really come together and is fairly unique, as well as Dynamic CRM.
So these are all got a different profile in terms of margin and they are all now pretty high growth businesses for us. So when you think about our cloud, you got to think about the low-level infrastructure. Even there we now have premium offerings and then we have higher level services. So that aggregate portfolio is what helps us move up the margin curve.
Excellent and one quick follow-up, how should we think about monetization Satya for the Windows devices sub 9 inch?
One of the comments I had made in my remarks was some momentum we're seeing in our consumer cloud services. So for example, the store monetization, Bing monetization, Xbox Live monetization as Xbox Live monetization as Xbox Live now in fact is going to span devices are all things that drive monetization for below 9 inches.
So I think of device gross margin in some cases because we are building devices like the phones as well as this post sale monetization using our consumer cloud services as the two additional
levers that we have in order to be able to monetize Windows devices.
We'll move to the next question please.
Brent Thill with UBS.
Thanks. Amy, just on the XP tail-off, are there other commercial products that you're seeing being impacted? I just wanted be clear there are a lot of questions that is there some type of Halo impact from the XP taking drop down on the other solutions?
Sure Brent, thanks for the question. I think it's the exact product portfolio that we talked about last year when the impact was happening, so let