Category: Microsoft

Amazon’s Q3 Earnings Miss Sparks Conversation About Ability Of AWS To Fend Off Competition From Microsoft, Oracle and Google

Amazon reported earnings per share of 52 cents on Thursday, missing the earnings target of 78 eps predicted by analysts by a margin that, in combination with other data points from the earnings report, subsequently sent the stock plummeting by 5% in trading on Friday. For the quarter ending September 30, 2016, the company reported revenue of $32.71 billion that slightly exceeded Wall Street estimates of $32.69 billion. Meanwhile, Amazon’s revenue guidance for the fourth quarter between $42 billion and $45.5 billion leaned toward the lower side of the spectrum of Wall Street’s expectation of $44.58 billion. To make matters even more worrisome for investors, Amazon projected operating income of between zero and $1.25 billion for the fourth quarter, whereas Wall Street had projected $1.62 billion. On a positive note, the company’s cloud services business unit, Amazon Web Services, claimed revenue of $3.23 billion, an increase of 55% in comparison to the $2.08 billion from the third quarter of last year that surpassed Wall Street’s expectation of $3.17 billion. Amazon explained its less than stellar earnings report by noting its heavy investments in original video content for Amazon Prime as well as fulfillment centers. Nevertheless, Amazon’s earnings per share miss and third quarter results more generally raised eyebrows in both the technology and investor community after a year of impressive growth and the preservation of its lead in the cloud computing space despite intensified competition. Axcient CEO Justin Moore remarked on Amazon’s recent earnings miss as follows:

Despite the Q3 EPS miss, over the longer-term, Amazon will continue to be a dominant force in both e-commerce and enterprise infrastructure – an incredible feat given that the customer sets are on the opposite ends of the spectrum. Amazon has been very clear that it will continue to focus on growth and not profitability. Investors have signed up for this approach for years so the blip in the stock will be tempered. Bezos has Amazon ‘primed’ for a dominant push to 2020 – and beyond. AWS and Prime continue to be Amazon’s primary growth and revenue drivers as the Seattle company broadens its lead in online commerce and cloud-computing services. The only real question for Amazon comes down to two factors: 1) its ability to appease investors appetite for ongoing record growth and 2) can it continue to maintain its lead over Microsoft, Google and Oracle who are equally committed to winning the cloud and have the benefit of being second mover which can be a benefit in these situation as infrastructure ages out and size and scale become inhibitors to innovation and performance. Expect to see all leverage M&A to acquire their way to technical leadership and hold an edge over the competition. That said, while there is plenty of startup talent to be bought at a premium, I don’t see Amazon losing this race anytime soon.

Here, Moore opines that Amazon’s ability to manage investor expectations and shake off the “second mover” advantage had by competitors such as Microsoft, Google and Oracle will determine whether it can continue the dominance in “e-commerce and enterprise infrastructure” that it has delivered, to date. Moore also notes that second movers stand to benefit from their ability to outpace the “size and scale” of their competitors with enhanced agility and innovation. Herein lies the stakes of Bezos’s gamble on innovation and investment in Amazon’s infrastructure: if Amazon can, indeed, afford to innovate on the rapidly expanding scale of its business and cloud operations with the agility of its competitors by re-investing resources acquired through its meteoric growth to date, Amazon stands poised to radically reconfigure the technology landscape over the next ten years in ways analogous to the disruption that Amazon Web Services brought to the cloud computing landscape. But in the event that the size and complexity of Amazon’s infrastructure mitigates against its ability to continue to deliver innovation, the chances of competitors such as Oracle and Google catching up to it, at least on the cloud services front, increase dramatically. According to Amazon’s CFO, Brian Olsavsky, Amazon built 18 new fulfillment centers in the third quarter while investing heavily in video content to enable Amazon Prime’s video services offerings to compete with Netflix. With respect to Amazon Web Services, however, one obvious question investors may have following last week’s earnings report concerns how Amazon intends to invest in AWS in response to Google’s rebranding of its cloud-based products and services coupled with Google’s aggressive emphasis on professional services for the enterprise.

Microsoft Stock Reaches All Time Highs After Earnings Announcement Featuring 116% In YoY Azure Growth

Microsoft reported adjusted quarterly revenue of $22.33 billion and earnings per share of 76 cents, exceeding analyst expectations of 68 cents per share for $21.71 billion in revenue for the first quarter of the 2017 fiscal year, namely, the quarter ending September 30, 2016. The 76 cents earnings per share announcement amounts to $6 billion in non-GAAP net income for Microsoft, or an increase of 9 percent in comparison to the $5.4 billion in net income for the first quarter of the 2016 fiscal year. Meanwhile, Microsoft Azure experienced 116 percent in revenue growth with its intelligent cloud offering bringing in $6.38 billion in revenue for the most recent quarter. Moreover, Azure compute usage more than doubled based on a year over year comparison. Microsoft’s impressive earnings report led to stock gains that surpassed the high of $59.97 reached in 1999 with share prices surpassing $60 per share in after hours trading. Thursday’s earnings announcement underscores the importance of Azure as one of the key drivers of Microsoft’s growth and illustrates the vitality of Microsoft’s “cloud first” transformation under Satya Nadella. Microsoft has yet to grapple with the implications of the recently announced Amazon-VMware partnership although Nadella’s emphasis on the company’s commitment to machine learning and artificial intelligence throughout all of its offerings may offer a clue as to one of its prospective differentiators in the cloud computing space.

Guest Blog Post: “The Art of the Cloud Wars” By Scott Jeschonek, Director of Cloud Solutions, Avere Systems

Editorial note: This article was authored by Scott Jeschonek, Director of Cloud Solutions, Avere Systems. The opinions expressed below are those of the author, Scott Jeschonek.

Chinese military strategist Sun Tzu once wrote that battles are won or lost before they are ever fought, but can the same be said for the cloud wars? Though many industry thought leaders have made projections, the future of how the battle between public cloud providers will unfold remains hazy. Despite projections that global IT spending will fall in 2016, investment in public cloud services is expected to grow 16% this year, fueling the fire of the on-going war. Most industry experts would agree that AWS, Google Cloud Platform, Microsoft Azure and IBM Cloud Services are the key players to watch, however many CIOs still struggle with determining which cloud service provider is right for them.

The table stakes for becoming the top public cloud provider are only getting higher with each passing quarter, and at the same time, the rise of a multi-cloud strategy is shaking things up. So, how will the cloud wars play out and how can enterprises that want to embrace the cloud choose the right CSP (or combination of CSPs) for their organizations?

When the technical features of the four hottest CSPs put them on relatively even playing field, it is the brand personalities and customer experience that can help organizations evaluate which cloud provider is most suitable for their needs. Below is a breakdown of how each CSP’s culture and decades-long experience with their respective specialties has influenced their approach to building and selling cloud offerings.

AWS

Launched officially in 2006, AWS is the oldest among the major CSPs and draws strongly from its foundations as an online marketplace to provide ease-of-use and a seamless on-demand experience. In the cloud wars landscape, AWS is like the U.S. military of the public cloud – bigger than all the others combined. AWS is very streamlined in how it offers its products, how they can be purchased and how fulfillment is handled. AWS’s ability to provide a user-friendly e-commerce experience isn’t a surprise, because, after all, AWS is Amazon. Just like you can buy a book or a suitcase from Amazon.com, you can buy compute time or storage. AWS also boasts sophisticated large-scale data base products, APIs and control structures, including AWS Lambda, which lets customers run code without provisioning or managing servers. Given Amazon’s core value of customer service, the rapid growth of AWS and its ease of use make sense.

Google Cloud Platform

While Google’s cloud offering is newer on the scene, its recent enterprise investment makes it one to watch. The company’s history of being forward-thinking and cutting edge is carried throughout its cloud platform value prop. At its NEXT conference in March, Google focused its keynotes on the sophistication of its technology, and how savvy developers could take advantage of Google Cloud Platform’s dynamic point-to-point networking, artificial intelligence and machine learning offerings. Google arguably has the most sophisticated developer cloud on the market, which makes sense as one of the large-scale inventors of web scale, or scale-out computing.

IBM

IBM, which combined its July 2013 acquisition of SoftLayer Technologies with its IBM SmartCloud to form the IBM Cloud Services Division, is building on its historical strength as a provider of consulting and computer services. Professional services and consulting is not necessarily top of mind for AWS or GCP, so IBM’s global cloud platform appeals to those customers looking for a stronger engagement model. Professional services is part and parcel to IBM, and it can combine its cloud offerings and consulting capabilities with other technologies such as Watson.

Azure

Rounding out the four, Microsoft’s Azure has a strong and steady history in the CSP market. Though it offers many of the same features as the other three “big guns,” it has stood out by intelligently leveraging its long-standing strength in the enterprise and bridging its existing enterprise capabilities with its newer cloud offerings. Customers can run other Microsoft software offerings such as Exchange, SQL Server or Active Directory both in the cloud or on premises. Microsoft also offers licensing incentives for existing enterprises customers as an option to help them embrace Azure.

If your organization is, for example, a next-generation application outfit and has been in the cloud from the get-go, then AWS or GCP will suit you just fine. If you’re generating an Internet-of-Things-based application with a mobile front end, for instance, that will run on Android and iOS and you’re storing a lot of data, any one of the four will handle the job admirably.

But here’s where it gets a little tricky: if you’re an enterprise customer with your own (or leased) data center(s) and Microsoft applications and backoffice applications processing lots of data (a bank, for example), it’s a much bigger proposition to move to the public cloud. This type of customer is currently a challenge for all four of the major CSPs. For organizations with a more traditional IT infrastructure, it’s not a matter of simply copying and pasting their applications and technology into the cloud and calling it a day.

A Demilitarized Zone: The Rise of the Multi-cloud Strategy

Partly in response to these complexities, we’ve seen the rise of hybrid cloud and multi-cloud architectures and approaches. Multicloud, in particular, has been an unexpected twist in enterprise cloud adoption. CSPs catalyzed enterprise cloud adoption by driving prices lower and enhancing the sophistication of their offerings, yet now this very same competitive dynamic is allowing businesses to choose different clouds for different workloads based on the strength of each CSP.

There’s also the age-old concern about having a single supplier and being subject to vendor lock-in. By adopting a multi-cloud approach, enterprises can avoid the “data gravity” problem: as data accumulates there is a greater likelihood that more and more additional services and applications will be attracted to this data. By keeping data in different clouds, enterprises can avoid arduous and difficult data migration while taking advantage of differing pricing structures among the CSPs.

In the end, yes, we’re going to see an intensification of the cloud wars among the four big public cloud providers – Amazon, Google, IBM and Microsoft – and that’s a good thing for enterprises moving to the cloud. This competition is at once driving down prices, increasing buyer options and inspiring innovations in IT architecture that will ultimately lead to more freedom of choice and the ability to purpose-build cloud environments for enterprises who are looking to the cloud(s).

Microsoft’s Acquisition Of LinkedIn For $26.2B Marks Opportunity For Nadella To Demonstrate Microsoft’s Cloud-based Transformation

Microsoft announced that it will acquire professional networking giant LinkedIn for $26.2 billion in cash on Monday. The acquisition, the largest in Microsoft’s history, represents a landmark moment for Microsoft and the technology industry as a whole by underscoring Microsoft’s transition from devices qua PCs and operating systems to cloud-based software and infrastructures under current CEO Satya Nadella. As Nadella put things in an interview, the acquisition brings together the “professional cloud and professional network.” With over 400 million members, LinkedIn represents a treasure trove of data not only about professionals, but also about hiring trends and the global labor market more generally. Microsoft stands in a better position to monetize the surfeit of data that resides within LinkedIn that LinkedIn itself, but will need to demonstrate an ability to execute on a strategic plan for integrating and monetizing LinkedIn swiftly in order to appease investors eager to see value from the deal. As such, the deal represents a ripe opportunity for Nadella to showcase Microsoft’s renewed capabilities for innovation and operational agility while further demonstrating components of his “cloud-first” vision for the company. Microsoft’s acquisition of LinkedIn constitutes emphatic validation of the business model of SaaS social media companies and underscores the business value of data about collaboration. Microsoft’s task now will be to drive the development of synergies between its portfolio of products and services and LinkedIn and possibly even leverage LinkedIn’s core backend technology platform to build applications that richly deliver possibilities for collaboration and communication in an age where the frequency of device-enabled communication claims parity with face to face interaction between human beings.

Mesosphere Closes $73.5M In Series C Funding

On Thursday, Mesosphere announced the finalization of $73.5M in Series C funding led by strategic investor Hewlett Packard Enterprise with additional participation from Microsoft, a new strategic investor, in conjunction with previous investors Andreessen Horowitz, Fuel Capital, Khosla Ventures, and new investors A Capital and Triangle Peak Partners. Mesosphere’s Data Center Operating System (DCOS) helps companies manage hyper-scale data centers as if they were one unit in addition to facilitating the operationalization of distributed applications, containers, micro-services and Big Data within cloud-based and on-premise environments. The San Francisco-based startup boasts customers such as Microsoft, HP, Yelp and eBay and currently staffs approximately 125 employees. The funding raise will be used to enhance its engineering operations in addition to expanding its sales and support teams. Microsoft and HPE remain likely acquirers of Mesosphere, particularly given Mesosphere’s collaboration with Microsoft on the Azure Container Service and Mesosphere’s partnership with HPE to leverage HPE hardware. The biggest news from today’s funding announcement is Microsoft’s participation as a new strategic investor, which corroborates reports that Microsoft attempted to purchase Mesosphere last year for approximately $150M. The $73.5M in Series C funding round brings the total capital raised by Mesosphere to $126M. In addition to the funding raise, Mesosphere today announced the release of Marathon 1.0, an enterprise-grade orchestration platform and a new product, Velocity, a continuous improvement and continuous development tool for its DCOS that uses the open source Jenkins framework.