While Microsoft’s results confirm the company’s slow-and-steady pivot to building its business around high-value enterprise services, star-studded PC industry sibling Apple has made its own play for platform expansion.
As we wrap up earnings week for both firms, what did we learn?
In Mac v. What’s going on PC?
You can see what’s happening at Microsoft here. The path taken appears to be growing service revenue (especially around cloud and SaaS), while PC sales and licensing revenue continue to decline from pre-Covid-19 pandemic levels.
When it comes to PC sales, Microsoft blamed the weak results on the Covid-related production shutdowns in China, which dragged down the overall PC market and said Windows sales were down. (In a related item, it’s interesting to note the wide discrepancy between IDC and Gartner’s current PC sales forecast.)
What Microsoft hasn’t said is that PC sales are feeling the effects of growing interest in Apple’s offerings. The introduction of Macs running Apple Silicon led to a huge boost in the company’s fortunes, with consumers and corporate customers investing in Apple’s new notebooks rather than PCs.
An Inconvenient Truth Partly on the strength of the iPhone, traditional resistance to deploying Macs in the enterprise has evaporated over the years. Yes, you’ll still find die-hard PC users who argue that Macs aren’t computers, but when it comes to getting work done without expensive tech support and accessing the cloud-based services offered by Microsoft and others, Macs play a level playing field. Today.
“The way the demand is increasing and the younger generations are expected to join the business, Apple devices will be number one. [enterprise] End point in 2030,” Jamf CIO Linh Lam said recently.
Increasing Mac marketshare poses an additional challenge as the PC market is highly competitive for Microsoft’s Windows partners. Margins are thin as manufacturers try to compete on price. Apple’s newly introduced M2 MacBook Air poses a real challenge to PC makers, with its computing performance per watt and roughly $1,200 sticker price. I suspect Apple will push hard to upgrade the entire fleet to the M2 in the next 12 months, setting the stage for the next big thing in the Mac, with 3nm chips taking Apple’s current power/performance a few notches up.
We know from Apple supplier TSMC that it will start producing 3nm chips (probably for Apple) next year, which in itself shows a steady road map for future Mac development.
What’s happening in the cloud?
Cloud services are another big area of business for Microsoft. We have data from Google that confirmed this week that Google Cloud grew 35.6 percent in revenue. That contrasts with Microsoft’s own cloud services (including Azure), which grew 20% in the quarter, compared with 26% in previous quarters.
As we know the adoption of cloud services is increasing, this points to intensifying competition among vendors in the enterprise cloud space. That could pose a continuing problem for small sellers, judging how much share is held by the big players.
[Also read: Everything-as-a-service, Apple, and the future of business]
Apple also has the presence of cloud services, but from a non-corporate angle. Already, these range from consumer-friendly offerings like Apple Music to primarily business-focused essentials like Apple Business Essentials.
Apple will announce its final financial results on Thursday, July 28, and while many in the industry will try to see the product-driven company as vulnerable to fluctuations in hardware sales, others point to a shift to services and the strong nature of its platform. As a main strength.
Morgan Stanley recently proposed a trillion-dollar search for Apple as it expands its own services, citing “Apple’s industry-leading retention rates and expanding ecosystem of hardware and services.”
What is happening in digital transformation?
The App Store gives Apple a strong position to monetize the company’s ongoing digital transformation. In a recent report based on surveys of C-suite executives, Gartner says it doesn’t expect enterprise technology spending to drop as business users understand the need to keep pace with digital transformation to improve efficiency and scalability.
“Going forward, implementing digital in a way that increases the productivity of employees, assets and working capital is essential,” Gartner research vice president Randeep Rathandran said in a statement.
As Apple breaks down its own data, we’ll get a clearer picture of how platform sales might develop in the future — but even the next gold rush shouldn’t overlook the services startup’s source of revenue. He waits for the kiss of life that Apple will give in 2023. Apple execs hope history repeats itself as the iPod, iPad and iPhone. Less meta.
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