Microsoft now all about cloud

Forget Surface, Lumia and Windows. Today’s Microsoft is all about cloud and subscriptions.

Surface Pro tablets sometimes sell well. Sometimes they don't. At the time of writing Microsoft says it has strong orders for the Surface Book. Yet the big story is elsewhere. Investors are more interested in the company's cloud progress: Azure grew 140 percent last year.

Office 365 subscriptions continue to surge. The interesting thing here is that Office 365 has broken out of the Windows market. The Android and iOS apps are a huge success and they, in turn, generate subscription revenue.

Microsoft financial reports show the full picture

Microsoft’s quarterly financial result highlights success with services sitting on top of Azure and Windows.

Reaction to the result was upbeat given stalling phone sales and traditional PC sales in a tail spin. Microsoft now only accounts for one percent of the global phone market. The company spent billions buying Nokia but may never recover the investment. PC sales are down ten percent on last year and that has implications for the companies hardware as well as the software it sells.

Microsoft has shown a remarkable ability to reinvent its business to cope with change. Looking back Satya Nadella’s appointment and his cloud focus looks like a masterstroke. The only fly in the oinment is falling margins. Cloud may be the future, but it can't match the margins from selling software the old fashioned way. That’s going to mean cultural changes throughout the business.