With a few organizational restructurings behind it, Microsoft is once again reevaluating the way it structures it financial reporting. It has been less than two years since Microsoft underwent the task of revamping its reporting structure. The previous reporting structure had the company reporting five business categories that included a Devices and Consumer Hardware section along with some Licensing segments that were further divvied up.
The arbitrary divisions among Microsoft’s licensing reports was a bit confusing at first as some instances included software spanning across unlikely categories. Instances of Office 365, for example, was reported under both Devices and Consumer and Commercial according to Microsoft.
However, for its fiscal 2016 reporting, Microsoft is set to report revenue income on a more organized and simplistic system. Microsoft’s new reporting is based on just three segments rather than five. Microsoft will now be reporting Productivity and Business Process, Intelligent Cloud, and More Personal Computing. While the phrasing is still very ambiguous, at least the categories are more streamlined for investors to understand.
As Windows journalist Mary Jo Foley reports;
The Productivity and Business Processes segment will include Office and Office 365 for commercial and consumer customers, as well as Dynamics and Dynamics CRM Online.
The Intelligent Cloud will include public, private and hybrid server products and services such as Windows Server, SQL Server, System Center, Azure, and Enterprise Services.
The More Personal Computing segment will include Windows operating system licensing revenues, devices such as Surface and phones, gaming including Xbox consoles, and search.
[pullquote align="right" cite="" link="" color="" class="" size=""] it is a calculated bet by Microsoft that its future is in the cloud [/pullquote]
While the news of Microsoft’s reporting structure is fresh, the move to organize the reports seems to be months in the making. Over the last few months, we have seen Microsoft lump its hardware and Windows efforts into one category while strategically positioning its connected cloud efforts front and center.
At the end of the day, it's a calculated bet by Microsoft that its future is in the cloud while Windows and its hardware efforts may ultimately become irrelevant. With Microsoft expecting its commercial cloud revenue to hit upwards of $20 billion by 2018, it seems like pretty solid bet.Further reading: Microsoft, revenue