What a week it's been for Microsoft (NASDAQ:MSFT), new-ish CEO Satya Nadella, and fans of the software giant. It began last week when Nadella issued his "Bold Ambition & Our Core" email, further stamping his persona on the 39-year old tech leader -- which had admittedly become stagnant. Nadella also made it clear where Microsoft's bread-and-butter lies going forward, acknowledging that devices will play only a nominal role.
Reinforcing its business transition with an emphasis on cloud technologies, among other things, the day following Nadella's missive Microsoft announced the acquisition of cloud data-recovery leader InMage. Coincidence? More recently, Microsoft announced its largest ever round of job cuts, expected to be completed by year's end. That's a busy week, and if you scanned some of the headlines, you might get the impression that Nadella's words of wisdom, the company's new acquisition, and significant layoffs were surprising. But for fans of Microsoft, all those steps were just a matter of when, not if.
The notion that Nadella's "new" direction for Microsoft was anything other than simply reinforcing what he's said from day one is the real surprise. Going back to when Microsoft announced that it would acquire Nokia's devices and services unit, Nadella made it clear how he felt about the deal. Though later Nadella "changed his mind," he was against the device business from the onset.
Nadella's vision has always been that Microsoft strategically position itself to grow in a "mobile-first and cloud-first world," a phrase used in his recently released statement. Nadella also used those exact words his very first day as Microsoft CEO, and has alluded to the new direction multiple times since. Nothing new here, but investors can take solace in knowing Microsoft's transition will continue full-steam ahead.
Like Microsoft's longtime rival IBM (NYSE:IBM), Nadella understands the future is about offering cloud-related tools and services and big data, and incorporating all that into a mobile-friendly environment. IBM's recent partnership with another Microsoft foe, Apple, is a sign of the mobile times. The deal between the on-again, off-again partners will entail IBM developing 100 or so applications for the iEverything maker, as well as incorporate its comprehensive suites of cloud technologies in the workplace.
The "other" deal
Though not necessarily as splashy as IBM pulling out all the stops in growing its cloud enterprise services business, Microsoft's deal with InMage is right in line with Nadella's vision. Last quarter's impressive 150% jump in revenues for Azure -- Microsoft's all-everything cloud platform -- along with a greater-than-100% jump in Office 365 sales was a nice start. InMage, with its data-recovery solution, addresses a primary concern surrounding the cloud -- data security and safety.
Microsoft, like IBM, recognizes that cloud revenues aren't going to come from hosting. That business has already become a commodity, as evidenced by the on-going cloud pricing wars. No, the answer lies in offering a suite of cloud products and services, safely and securely. Both Microsoft and IBM have the product suites to profitably offer clients cloud productivity tools, and their respective cloud revenue growth is a testament to that.
Scuttlebutt surrounding pending job cuts at Microsoft has swirled for months, particularly as the Nokia deal neared completion. As soon as Microsoft reported that 30,000 former Nokia employees would be part of the package, it was clear job cuts would follow before long. Not surprisingly, of the 18,000 job cuts expected this year, an estimated 12,500 will be ex-Nokia folks. A sad day for many a worker, no doubt, but from a business perspective investors seem to recognize the need to flatten Microsoft's corporate structure. Leaner is not only meaner, it's faster, a necessity in this fast-moving, mobile and cloud world we live in.
Final Foolish thoughts
A busy week if you're a Microsoft fan, but based on its over 5% jump in share price in the past five trading days, it's also been a nice week. The fact that Nadella's note outlining the "new" Microsoft, its cloud acquisition, and job cuts, wasn't surprising doesn't mean it wasn't beneficial. IBM is just one of many cloud and mobile heavy hitters to contend with, but with Nadella leading the charge, Microsoft's getting ready for the battle. Surprise? Not really, just that it took this long.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, International Business Machines, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.