Microsoft Earnings Call Nuggets: Office 365 Metrics and Distribution Outlook

Microsoft Corporation (NASDAQ:MSFT) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Office 365 Metrics

Mark Moerdler – Sanford Bernstein: Thanks guys for the cloud data, we’ve been looking for a lot of this, so it’s very helpful. Let me ask, I guess two related parts to that. Can you give us a sense on the growth metrics in terms of Office 365 which is what you’re starting to give here in terms of revenue, users, customers, something that we can think about there? The second half of it, can you give us a sense in terms of the percentage of Office 365 customers that are net new to Exchange, I know you’ve given a little bit data on SMB and new SMB customers, but any sense there would be appreciated?

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Peter Klein – CFO: On Office 365, the metric that we gave was net – seat additions are up five times over the prior year. So that gives you some growth metric in addition to the revenue number. To your point on Exchange or more broadly, I would say about other workloads, we’re seeing exactly that dynamic. So, not only are we addressing and reaching new customer segments like SMB, but many of them have never had a productivity server workload before not just Exchange but others as well. And even those that have had Exchange are now using other workloads and so we’re most of our customers having more than one workload. So across every division in terms of revenue streams from the service, new customer segments and new workloads there’s a lot of new and that’s what driving the growth and the opportunity that we’ve been looking for.

Distribution Outlook

Philip Winslow – Credit Suisse: You provided a little bit color on service obviously we’re seeing an expanding portfolio there. Just wondering to get a sense of how this is evolving especially on the distribution side and how the product is doing versus your expectations? Then when you start to think about going forward how would you also expect the product portfolio to evolve as well as distribution?

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Peter Klein – CFO: Great question. As I said we’re expanding both the product set and distribution and that is broadly all devices inclusive of service. We are expanding distribution of service. We’re now in 22 countries, 70 retailers and we’ll continue to look to expand that not only just expanding but improving experience and that’s true not just for service but for broadly our Windows 8 devices. So, we’ll be investing against that for both service and a broader array of Windows 8 devices at multiple price points including lower price points going forward.

A Closer Look: Microsoft Earnings Cheat Sheet>>

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