15 Takeaways From Microsoft's Financial Analyst Meeting

Microsoft On Microsoft

Microsoft CEO Steve Ballmer said Office is headed to Android and Apple tablets, the company is doubling down on its device strategy and that delivering services to the cloud is the future of the company.

At its annual financial confab in Bellevue, Wash., Thursday with financial analysts, Ballmer and other Microsoft top brass outlined where the company is now and where it is headed. During the nearly five-hour long meeting, streamed online, there was little discussion on CEO succession, Microsoft's recent acquisition of phone maker Nokia or what to expect to from the next-generation Surface -- set to be unveiled Monday at a New York City event.

Here are 15 excerpts from the long-winded meeting highlighting the high points.

Microsoft Business Snapshot

We don't break our business down too often for you by customer segment. But if you look at our business and the makeup of the company today, well over 55 percent of the business is enterprise, and additionally, there's some OEM business there that belongs in enterprise, but that's how we count it and market it. Nineteen percent is OEM. Twenty percent is consumer and online. And, a fair piece of the OEM is also consumer and online. And, 6 percent is our small and midsize business. And then when you look at that full picture, as a segment, it's really telling of where we've got a lot of strength, and it's complemented with our consumer presence. On the product side, again, the Office division is the biggest division in the company at 35 percent of our overall total. Server and tools is second at 26 percent. Windows is third now at 25 percent. Entertainment and Devices is 13 percent. Bing and online at 4 percent. So you can see the shape and transition of our business on this particular chart that Windows is now the third-largest business in the company.

-- Microsoft COO Kevin Turner

Surface 'Consternation'

When we announced Surface a little more than a year ago, there was a lot of consternation, let's say, in the OEM channel. As a result of that consternation, today, when you talk to the OEM channel, in most instances, they would tell you that the progress we made in 8.1 -- because we have a first-party product at Microsoft -- is far superior to anything we've ever delivered from a hardware-software integration to our OEM partners going forward. And, again, you're going to see that more and more of those themes within the technology and the hardware and the software are going to go away and dissipate as we get better and better and certainly continue to build our capability in this area.

-- Microsoft COO Kevin Turner

Old Microsoft Vs. New Microsoft

We know the Microsoft that was on the left. A company that made a royalty on PCs generally made a license on consumer software and sold licenses into IT departments in the enterprise.

The model we're already shifting to was moving to a device business that's still royalty-based but also gross-margin-based, an enterprise service business that's licensing and subscription and a consumer service space that's advertising- and subscription-based.

Where are we? We're on our journey. And, I think our goal today is to point out where we are in some very important examples.

-- Microsoft CFO Amy Hood

Microsoft's Four Big Megatrends

Microsoft says it's chasing after four big megatrends in tech: cloud, social, mobility and big data.

We offer three distinct types of cloud: private, hybrid, and public. If you take infrastructure and platform with Azure and SQL Azure and Windows Azure, we also provide a service there with Intune where we remotely manage desktops.

-- Microsoft CEO Steve Ballmer

Megatrend: Social

The ability to put Active Directory in the cloud gives us this incredible opportunity that we have on identity and management and single sign-on and all of the things for provisioning of the cloud and enabling of the social enterprise. Lync is a billion-dollar product. Skype has 320 million users.

-- Microsoft CEO Steve Ballmer

Megatrend: Mobile

The second big area that we are focused on in mobility is we want to be the leader in mobile device management. And with the new release of System Center, we not only manage Windows devices, we also manage iOS and Android devices really well.

-- Microsoft CEO Steve Ballmer

Megatrend: Big Data

Our big data assets line up like this: SQL, certainly at the heart. When you look at our big data assets and you think about big data and what we do with big data here in the company, the ability to bet on Hadoop is at the heart of our big data story. So what we've done with Hadoop is we've made a full bet. We're completely aligned with Apache on Hadoop.

-- Microsoft CEO Steve Ballmer

Microsoft On The Future Of The PC

We must do the job to ensure that the PC stays the device of choice for people when they're trying to be productive in life. It doesn't mean that people aren't going to buy some tablets to be productive, but if you look at the bulk of the tablet market today, it's moving actually to smaller tablets.

-- Microsoft CEO Steve Ballmer

Ballmer On Importance Of Office And Azure

Office 365 and Azure have got to be a touchdown. They've got to have the innovation, they've got to have the differentiation, they've got to have the value, they've got to have the sales and marketing energy and support to really, really, really kick ass.

We need to continue to innovate in high-value activities. When we get together as a leadership team, we're sitting there and talking about what are we going to do this year to improve the meeting experience, how quick is it for people to connect people remotely, how good does digital whiteboarding work, how good does the pen work as a tool for annotation and drawing and sharing in the meeting?

-- Microsoft CEO Steve Ballmer

Building More Microsoft Devices

Devices and services, to me, doesn't mean that we're going to make all the devices. We want a healthy ecosystem. We absolutely love partners, and we want that open ecosystem. But, it does mean we're not going to make some of the devices and some of the hardware. And so you're seeing us get into some of that first-party hardware.

-- Microsoft CEO Steve Ballmer

Ballmer Eats Humble (Mobile) Pie

Mobile devices, we have almost no share. I don't know whether to say that with enthusiasm or kind of uncomfortable tension, but I'm an optimistic guy. Anything we have low market share sounds like upside opportunity to me. The Nokia deal is a lot of things. One of the things that it certainly is a way to make sure that we can actually capture the gross margin upside, because we are making most of the investment today that we need to make even owning Nokia.

-- Microsoft CEO Steve Ballmer

Microsoft As An Innovation Leader

There just aren't that many people left making fundamental operating system investments. UI innovation ... is critical, because inventing the next hardware-software paradigm does create an opportunity to make a ton of money.

Machine learning, at scale, it's hard to argue that, other than Google and Microsoft, anybody is making an at-scale investment in helping develop technology that studies the world and studies the user, and tries to help computers learn about people and serve them better. It is a scale game. It's a moat. There are really only two people who are making the investment, the investment in the cloud infrastructure, the investment in the technology, and I think it will be one of the defining characteristics of the next generation of device and user interface.

-- Microsoft CEO Steve Ballmer

A Promising Year Ahead For Microsoft

We have a phenomenal, phenomenal launch year ahead. You know about Windows 8.1; you know about Xbox One. We've got new releases of Office, new releases of Office 365, new releases of Bing, new releases of Azure, new releases of Windows Server, new releases of Dynamics, new releases of Windows Phone. All across the board, our portfolio in FY14 has grown incredibly over the last year.

-– Microsoft COO Kevin Turner

Office Headed To iOS And Android?

The two key areas that we are going to focus on, on mobility first and foremost is around productivity. We're really driving for the best Office mobile experience across all platforms. And we want to provide a great experience on both iOS and Android phones.

And so we're continuing to work through how to bring and be the strongest productivity player across all platforms, including iOS and Android in the marketplace.

-- Microsoft COO Kevin Turner

Now, we are working on touch-first versions for our core apps in the Office suite, Outlook, Word, Excel, PowerPoint, and we will bring these apps to Windows devices, and also to other devices in ways that meets our customers' needs, and the customer value of those experiences, and in ways that economically make sense for Microsoft, and at a proper timetable. That's how we think about making these decisions as the question is being posed.

-- Microsoft EVP Qi Lu

Ballmer Regrets

If there's one thing I guess you would say I regret, I regret that there was a period in the early 2000s when we were so focused on what we had to do around Windows that we weren't able to redeploy talent to the new device form factor called the phone. That would probably the thing I would tell you I regret the most, because the time we missed was about the time we were working away on what became Vista, and I wish we'd probably had our resources slightly differently deployed, let me say, during the early 2000s. It would have been better for Windows and probably better for our success in other form factors.

-- Microsoft CEO Steve Ballmer