Taking a hint

Microsoft results deliver blunt hint to next CEO

Microsoft's financial results deliver a blunt hint to the tech giant's next chief executive. PC sales are shrinking, and profits from the consumer business have puckered up. But quarterly earnings are a pleasant surprise, with the enterprise side generating copious black ink. It's another reminder that the company's boss-to-be needs to focus on corporate software.

While poor revenue figures from IBM and Oracle implied that the market for business IT was weak, Microsoft's top line suggests otherwise. Quarterly revenue rose 16 per cent compared with the same period last year, and enterprise cloud sales more than doubled. Customers also purchased databases at a strong clip.

That goosed income 17 per cent. A closer look at profit, however, reveals a tale of two companies. Microsoft's consumer and devices business is under pressure from rivals, as all three divisions-hardware, software licensing and online businesses like search-delivered declining profits.

Its corporate business, on the other hand, is chugging along nicely. The Redmond-based firm says the enterprise PC market showed signs of stabilizing, traditional business software - which generates about two-thirds of company profits - grew and margins in the thriving online corporate-software business increased.

Meanwhile, Microsoft's board is weighing candidates to replace CEO Steve Ballmer. Unfortunately, management still seems wedded to his expansive and somewhat vague strategy of creating devices and services that "empower people around the globe at home, at work and on the go, for the activities they value most."

The company does a bang up job in the enterprise market but has produced frightening amounts of red ink trying to master hardware and online services for consumers. The new boss needs to take the hint and concentrate on what Microsoft obviously does best: produce software and business services for corporate customers.