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Microsoft Q4 FY 2014 Financial Results
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Microsoft Q4 FY 2014 Financial Results

This afternoon Microsoft held an earnings call to announce the results of their fourth quarter for fiscal year 2014.

Strong growth in Microsoft’s cloud offerings offset a loss by the recently acquired Nokia Devices and Services to contribute to an overall GAAP revenue of $23.4B, up 18% from Q4 2013, and up 15% from Q3 2014. Gross Margin came in at $15.8B which is 67.5%, with an operating income of $6.5B and net income of $4.6B for the quarter. Operating income was up over Q4 2014, but net income was down due to an additional $785M set aside for income taxes. Diluted earnings per share was $0.55, which missed analysts’ expectations of $0.60. For the quarter, $3.4B was returned to shareholders which was a 17% increase from last year.

Microsoft Q4 2014 Financial Results (GAAP)
  Q4’2014 Q3’2014 Q4’2013
Revenue (in Billions USD) $23.382 $20.403 $19.896
Operating Income (in Billions USD) $6.482 $6.974 $6.073
Gross Margin (in Billions USD) $15.787 $14.462 $14.294
Net Income (in Billions USD) $4.612 $5.660 $4.965
Margins 67.5% 70.8% 71.8%
Earnings per Share (in USD) $0.55 $0.68 $0.59

The Devices and Consumer lines came in with good results for the quarter, with the caveat that Q4 2013 included the $900M write down of Surface RT inventory which skews the results somewhat.

Devices and Consumer Licensing contributed $4.7B to the overall revenues and $4.4B to Gross Margin with both values being higher both sequentially and year-over-year. Windows OEM revenue was up 3% with a split of an 11% increase in Pro revenue combined with non-Pro revenue being down 9%. The non-Pro decrease can likely be at least somewhat attributed to offering Windows free for certain devices now. Office Consumer revenue was up 21% compared to Q4 2013, and Windows Phone revenue was up 95% due to no longer having to pay for the commercial agreement with Nokia.

As for consumer hardware, revenue was up 23% from Q4 2013 at $1.44B but down from the $1.97B last quarter, and Gross Margins increased 103% year-over-year to $0.02B which is also down from $0.26B last quarter. The large increase in Gross Margin is attributed to the Surface RT right off last fiscal year and Microsoft also took a hit for not shipping a new form factor this quarter which is likely the rumored Surface Mini, which didn’t ship as expected with the Surface Pro 3. Overall Surface revenue was $409 million for the quarter. Xbox sold 1.1 million consoles this quarter, and had a 14% increase in revenue driven by increased console revenue. The new segment to Devices and Consumer hardware is the Phone Hardware, which contributed $1.99 billion in revenue but the new Nokia division came in at a $692M loss. Microsoft reported sales of 5.8 million Lumia Smartphones, and 30.3 million other phones.

The final piece of the consumer division is D&C Other, which includes Office 365 Consumer, Resale, Windows Store, Xbox Live, Bing, and a few other offerings. Revenue for this segment was up $20% year-over-year at $1.88B, but down from the $1.95B in Q3. Gross Margins were also up 21% from last fiscal at $0.45B. Microsoft added an additional 1 million new subscribers to Office 365 Home and Personal, which now totals 5.6 million subscribers. Bing advertising revenue was up 40% due to higher revenue per search, higher search volume, and an expiration of payments to Yahoo from last year. Bing search share is now at 19.2% in the US, up 130 basis points from the same time a year ago.

The commercial side is where Microsoft makes the majority of its revenue, and this quarter is no different with overall revenue coming in at $13.48B for the quarter which is an increase of 11% year-over-year. Gross Margin was also up 10% at $10.99B for the quarter. Commercial is broken down into Commercial Licensing and Commercial Other, with the former being up 6% to $11.22B in revenue and the latter up 44% to $2.26B. Commercial Licensing includes revenue for on premise offerings such as Server 2012, SQL Server, and System Center, while the Other segment is for cloud offerings and services which grey 147% from the same period last year.

Microsoft Q4 2014 Segment Overview (in Billions USD)
  Q4’2014 Q3’2014 Q4’2013 Percentage for quarter
D&C Licensing Revenue $4.69 $4.38 $4.29 20.1%
D&C Licensing Gross Margin $4.41 $3.91 $3.88 27.9%
D&C Hardware Revenue $1.44 $1.97 $1.17 6.2%
D&C Hardware Gross Margin $0.02 $0.26 -$0.65 0.1%
D&C Other Revenue $1.88 $1.95 $1.56 8.0%
D&C Other Gross Margin $0.45 $0.54 $0.37 2.9%
Phone Hardware Revenue $1.99 NA NA 8.5%
Phone Hardware Gross Margin $0.054 NA NA 0.3%
Commercial Licensing Revenue $11.22 $10.32 $10.58 48.0%
Commercial Other Revenue $2.26 $1.90 $1.57 9.7%
Commercial Gross Margin $10.99 $9.91 $10.00 69.6%

So what can we learn from this quarter? Clearly Microsoft is well positioned going forward to continue its play in the enterprise, with cloud services in particular being a strong point. No other cloud provider has the product offerings which can compete for the hybrid cloud model of on premise servers running alongside cloud offerings, and they are leveraging this strength to make substantial gains in this sector. As for the consumer offerings, we now see why such drastic action was taken last week with the downsizing of the Nokia division in particular, which lost almost $700 million this quarter. A lot of the job cuts were aimed at manufacturing, and those will likely be aimed towards locations that created the non-Lumia smartphones. Earnings for the quarter were right in line or slightly over the projected results provided last quarter, assuming the Nokia earnings and loss are excluded because they were not a part of Microsoft when the projections were made. Microsoft as a company has traditionally been used to the high margin software business, and the recent push to be a hardware manufacturer has shown that this is a low margin, high risk playground with all of the major losses being in hardware. With a new CEO at the helm for the full FY 2015, we’ll have to see what his vision and patience are for the hardware segment.

New Humble Bundle Offers Games From Square Enix
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New Humble Bundle Offers Games From Square Enix

Today the latest Humble Bundle has gone on sale and it offers a good selection of games from the Square Enix library including all the entries in the Deus Ex franchise, titles in the Hitman series, and a variety of other titles that they have published over the years. At the usual “pay what you want” tier ($1 pledged or more is required for Steam keys) there’s the following selection of games.

  • Thief Gold (92% PC, 10/1999): An expanded version of Thief: The Dark Project which is a stealth game where the player takes control of a master thief who must complete objectives without being detected.
  • Daikatana (N/A PC, 04/2000): A first person shooter game which takes place across different time periods and locations.
  • Mini Ninjas (74% PC, 09/2009): A third person action adventure game where players control one of six playable characters, each with different items and abilities.
  • Anachronox (77% PC, 06/2001): A third person role playing game where the player assumes the role of a private investigator who stumbles upon a mystery that threatens the fate of the universe.
  • Hitman: Codename 47 (73% PC, 11/2000): A stealth game where players take the role of a trained hitman tasked with assassinating criminal masterminds involved in experiments that had been performed on the character.
  • Hitman 2: Silent Assassin (87% PC, 09/2002): A sequel to Hitman: Codename 47 where the player again takes the role of Agent 47 and must complete missions involving the assassination of various targets.

By beating the average price which at the time of writing is at $6.63 and trending upward, a selection of more recent titles is unlocked. It’s worth noting that this pricing bracket includes two games in the Deus Ex series, albeit the lesser praised of the four Deus Ex titles. More titles are expected to be added to the list below in the coming days.

  • Deus Ex: Invisible War (80% PC, 12/2003): A first person shooter which is a direct sequel to the original Deus Ex which combines elements of RPG and FPS games and puts the player in a technologically advanced world filled with conspiracy .
  • Deus Ex: The Fall (46% PC, 69% iOS, 07/2013): A title which originally launched on iOS and was later brought to Android and PC. It continues the story of the Deus Ex: Icarus Effect novel and features similar gameplay elements to Deus Ex: Human Revolution
  • Hitman Absolution (79% PC, 11/2012): The most recent entry in the Hitman franchise. Features similar gameplay to the previous games while continuing the main character’s story.
  • Nosgoth Veteran Pack (N/A PC, 2014): A booster pack for an upcoming free-to-play action game that is currently in Early Acess status on steam.
  • Battlestations: Midway (76% PC, 01/2007): An action game that lets the player control various air, sea, and underwater vehicles as part of naval battles during World War II.

Finally, paying more than $14.99 unlocks the whole selection of titles including some very recent ones like Deus Ex: Human Revolution Director’s Cut and Just Cause 2. The original Deus Ex: Game of the Year edition is also included which rounds off the Deus Ex games for anyone who wishes to pick up the entire series in this bundle. The full list of games in the $14.99 tier is laid out below.

  • Deus Ex: Human Revolution Director’s Cut (91% PC, 08/2011): A prequel to the original Deus Ex. Combines elements of FPS and RPG games allowing the player to modify themselves with various mechanical augmentations and to perform various side quests in addition to the main story. The director’s cut includes the Deus Ex: Missing Link DLC which was originally released after the original game.
  • Just Cause 2 (84% PC, 03/2010): An open world action-adventure game that lets the player complete objectives in various different ways with an array of weapons and vehicles along with the ability to reach great vertical heights using grappling hooks and parachutes.
  • Lara Croft and the Guardian of Light (82% PC, 08/2010): A platform adventure game where the character must use various weapons and skills to solve puzzles and traverse levels.
  • Deus Ex: Game of the Year Edition (90% PC, 06/2000): A game which combines various elements of action, stealth, FPS, and RPG games. The player progresses through the game while upgrading their character’s nano augmentations and uncovering various conspiracies involving groups like the Illuminati and Majestic 12.
  • Kane & Lynch 2: Dog Days (66% PC, 08/2010): A third person shooter game where the player takes control of two criminals trying to keep alive after an arms deal goes wrong.

While it’s not the most incredible Humble Bundle that has ever been put out, the Square Enix bundle offers a solid collection of games. Personally I believe that just picking up the entire Deus Ex series is well worth the $14.99 and everything on top like Just Cause 2 and Hitman: Absolution is just an added bonus. The Humble Square Enix Bundle will run for the next two weeks and payments can be split between Square Enix, the GamesAid and Make-A-Wish charities, and Humble Bundle, Inc. to help them continue to run these game bundles.

Asus RT-AC87 AC2400 Router with Quantenna Chipset Set to Ship
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Asus RT-AC87 AC2400 Router with Quantenna Chipset Set to Ship

Back at CES earlier this year, I had visited Quantenna and covered the announcement of their QSR1000 4×4 802.11ac MIMO chipset. It was announced that the Asus RT-AC87U would be the first QSR1000 enabled router to hit retail. Despite the announcement at CES, no availability date or price was announced.

Things are getting together now, and Asus and Quantenna have announced that the RT-AC87U is all set to ship (Best Buy actually has it for purchase right now). The router will retail for $270, an admittedly steep price, but one that should be seen in context with the Broadcom-XStream enabled Netgear R8000 that is shipping for $300. The router also seems to be a bit lacking in the I/O front, with only one USB 2.0 port apparently. [ Update: Some readers have mentioned that a USB 3.0 port is hidden beneath a flap in the front. ] That said, it is like that most of the power users who are going to purchase this already have a dedicated NAS device (and don’t need USB 3.0 or eSATA ports in their routers).

The RT-AC87U is a bit more future-proof with respect to Wi-Fi standards, thanks to it being the first shipping 802.11ac Wave 2 router. As part of the Wave 2 features, we get four spatial streams and support for MU-MIMO (we do need clients supporting it to get the full benefits). One of the most obvious benefits of going to Wave 2 is the 160 MHz-wide channel support, but, that is not part of the Quantenna QSR1000 chipset that is being used in the Asus RT-AC87U.

Obviously, technology moves at a rapid pace, and one can always wait for the next big thing. There is also talk online of Netgear releasing a Wave 2 router (Nighthawk X4) soon (the FCC details are already out), but official details are scarce. In effect, if readers are interested in hopping on to the Wave 2 bandwagon, the Asus RT-AC87U will be the first opportunity.

NVIDIA Launches Shield Tablet
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NVIDIA Launches Shield Tablet

Today, NVIDIA is announcing the Shield tablet. While normally such launch announcements don’t require much in the way of exposition, NVIDIA is in an odd place. Last year, the Shield portable and Tegra Note 7 were the primary mobile devices shipping with Tegra 4.  In hindsight, the Shield portable was a bit too niche to ever reach mass adoption. It was first and foremost a gaming device, with a display attached to a controller as opposed to a controller attached to a display. The result was that while it was surprisingly good for gaming, it wasn’t the best tablet. It really only worked in landscape mode, the display size was relatively small (5 inches diagonal), and using the touchscreen was an awkward experience.

The Tegra Note 7 was NVIDIA’s attempt at competing in the mainstream tablet market. While the dual front facing speakers and stylus were good advantages over the Nexus 7, it wasn’t clearly better than the Nexus 7. The display was lower resolution, lower contrast, and not as well calibrated. The WiFi module only supported 2.4 GHz, and there was only a gigabyte of RAM. While it was possible to emulate a Shield-esque experience with the Note 7, there was no game streaming from PC to tablet due to the lack of 5 GHz WiFi, and the controllers on the market simply weren’t as good as the controller in Shield. In addition, because the Tegra Note 7 wasn’t directly controlled by NVIDIA the experience in software update speed could vary.

From the lens of past experience, the Shield tablet makes a lot of sense. The specs are right for a good tablet, but it’s also a proper Shield device. As a tablet, it has all the right pieces. A high resolution display, Tegra K1 (Cortex A15 variant), dual front facing speakers and bass reflex ports, a new stylus, 5 GHz WiFi, and a 5MP front facing camera. I’ve put a table of the specs below for easier reading.

  NVIDIA SHIELD Tablet
SoC Tegra K1 (2.2 GHz 4x Cortex A15s)
RAM/NAND 2 GB DDR3L-1866, 16/32GB NAND + microSD
Display 8” 1920×1200 IPS LCD
Network 2G / 3G / 4G LTE (NVIDIA Icera i500 UE Category 3/4 LTE)
Dimensions 221 x 126 x 9.2mm, 390 grams
Camera 5MP rear camera, 1.4 µm pixels, 1/4″ CMOS size. 5MP FFC
Battery 5197 mAh, 3.8V chemistry (19.75 Whr)
OS Android 4.4.2
Connectivity 2×2 802.11a/b/g/n + BT 4.0, USB2.0, GPS/GLONASS, mini HDMI 1.4a
SIM Size None or MicroSIM

In the stylus side, DirectStylus 2 is said to reduce the inking latency to half that of the implementation we saw in Tegra Note 7. In practice it seemed that the stylus latency was low and lines tracked closely to the stylus, but I’ll avoid final judgment until the review. NVIDIA also claims that there are more levels of pressure sensitivity, but it’s not quite clear how many levels there are. NVIDIA has also added handwriting recognition software, which worked relatively well in some casual testing. The Dabbler application also seems to provide a relatively realistic simulation of various physical mediums such as oil painting and watercolor, although it’s mostly targeted towards artists.

In addition to the stylus features, NVIDIA is advertising 1080p Netflix support. Normally, due to the DRM restrictions associated with high bitrate streaming, most Android devices only support low resolution streams. NVIDIA has done all of the necessary work to satisfy these DRM requirements, so it supports the highest bitrate available to mobile devices. Of course, this feature will be disabled with an unlocked bootloader, but it’s a good feature to have for mobile streaming.

Outside of tablet features, the gaming features seem to be quite compelling. The controllers themselves were comfortable, and were very similar to the Shield portable’s ergonomics. NVIDIA is emphasizing that these controllers connect over WiFi direct, and the frequency selected depends upon the network that is used. The result is much lower latency, and NVIDIA is also able to run a headset jack and microphone through the controller due to the higher bandwidth that WiFi provides. Up to four controllers can be paired to the Shield tablet for multiplayer games.

Due to the addition of 5 GHz 2×2 WiFi, NVIDIA’s GameStream and GRID, which means that it’s possible to stream games from a PC within the same LAN to Shield tablet and play games by streaming from NVIDIA servers to the tablet. NVIDIA did note that only 720p is supported through WiFi, and an Ethernet connection is necessary to stream at 1080p due to latency reasons.

While both GameStream and GRID are largely similar in experience compared to the Shield portable, the Kepler GPU in the Tegra K1 enables a great deal of potential for gaming. Trine 2 will ship with the tablet, and is a direct port from the console game. NVIDIA also showed off the improvements in games like Half Life 2 and Portal, which run full OpenGL rather than OpenGL ES as it did on Shield portable. Outside of feature set, NVIDIA is claiming that the K1’s GPU is far faster than the GPU in either the Exynos 5420 or Apple’s A7 SoC.

In addition, NVIDIA showed off a full version of War Thunder running on Shield tablet, and claimed that it will be able to play on multiplayer with PCs. This included both the tank and aircraft combat aspects of the game. NVIDIA also showed that the Unreal Engine 4 demo from Google IO runs on the Shield tablet.

Finally, the Shield tablet will be the first Android tablet to support streaming to Twitch. By leveraging the built in front facing camera, it’s possible to stream both gameplay and webcam/commentary. In practice, I didn’t see any noticeable issues with this system, and it seemed to work as promised. The 1.4 micron pixel size seemed to make the quality relatively acceptable even indoors.

That was a lot to go over, but I think the key here will be the native gaming experience on Shield tablet. While it’s fully possible for Shield tablet to serve as a dedicated console with GameStream, the real use case will be whether it can provide a solid gaming experience using the SoC for rendering rather than as a video decoder for a PC somewhere else. With games like War Thunder and Trine 2, it seems that there is immense potential for a very compelling product. While NVIDIA isn’t starting from nothing this time around, this ecosystem aspect is still a bit risky.

The Shield tablet will go on sale July 29th for the US, August 14th for Europe. The 16GB/WiFi variant will cost 299 USD, the 32GB/LTE variant will be 399 USD. The controller is priced at 59 USD, and the flip cover at 39 USD.

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Nokia Lumia 630 Review

With the introduction of the Lumia 630 and 635 models, we have our first look at the next generation of low cost Windows Phone devices, and the Lumia 630 is a phone with many firsts for this segment. It’s the first phone launched with Windows …