People like to compare Microsoft and Apple, but the truth is, they couldn't be more different. Microsoft's businesses are more diverse than Apple's and are of course far more business oriented. A quick examination of Microsoft's billion-dollar businesses shows where the company makes all its money today. How that will change in the coming years?
Not much, I bet.
It's no mystery that Microsoft wants a piece of Apple's consumer cachet: The way Microsoft markets modern products such as Windows 8, Surface, Office 2013, Windows Phone, Bing, and services such as Outlook.com and SkyDrive speak to this desire. I get it. But Microsoft is no Apple. And to see that, all you have to do is look at the company's biggest businesses.
This week, Windows Azure joined a once-select group of Microsoft's billion-dollar businesses. These are the businesses within Microsoft that generate over $1 billion per year in sales. And there are now a lot of them. Aside from Azure, those businesses include the obvious heavy-hitters such as Windows, Office, and Xbox, but also Developer Tools, Dynamics (ERP & CRM), Online Display and Search Advertising, SharePoint, SQL Server, System Center, and Unified Communications. (Thanks to my Windows Weekly co-host Mary Jo Foley for providing this rundown.)
Notice any trends in that list?
Only one business, Xbox, is purely consumer based. And while two of the bigger businesses, Windows and Office, both have strong consumer components, both are still primarily business-oriented concerns, and both are essentially "legacy" businesses in that they're both decades old. All of the other billion-dollar businesses are much newer and, yes, all are decidedly business focused.
With this group of huge businesses in mind, it's doubly understandable why Microsoft is so interested in consumers for future growth. Consumers are essentially an untapped market for the erstwhile software giant, a group that basically has used Microsoft products such as Windows and Office because they had to and has been, in more recent years, choosing alternative Apple and Google platforms for their own devices. (Xbox is the one exception, of course, but that's actually a relatively small market.)
Oddly enough, however, it's hard to come up with a new billion-dollar business for Microsoft that's entirely consumer focused. Office 365, certainly the next member of Microsoft's billion-dollar club, includes a mix of consumer (Office 365 Home Premium) and business offerings and should closely match Office in this regard. But beyond that? I don't see a single consumer business in the running.
Windows Phone is a possibility, although I suspect there's a reason Microsoft currently buries that product's earnings inside of Entertainment & Devices. I figured Windows Intune was a player, but it's been subsumed into another billion-dollar business, System Center, and might never be differentiated in that way. Both of these products will live or die based on business acceptance, however, or in Phone's case a mix of consumer and business.
(Humorous aside: Here's an oddball candidate for Microsoft's next billion-dollar business: Android and Chrome patent licensing. Microsoft has convinced over three quarters of all firms that ship Android devices to licenses its patents, and the firm's estimated haul is in the hundreds of millions of dollars per quarter. That's right: It could already be a billion-dollar business.)
When you consider the reality of Microsoft, its consumer aspirations seem both quaint and pointless. And the Windows 8 critics who never tire of complaining about the artificial grafting of a mobile OS onto their beloved desktop platform might actually have a point: In its mad bid to attract consumers to Windows, Microsoft might have done the unthinkable and alienated its best customers, those businesses that have driven the firm's successes to date.
It's certainly something that might have been more carefully considered. After all, the numbers don't lie.
