Analysis: Microsoft (Nasdaq: MSFT) took a big write-down for smartphone assets in its latest earnings, but a host of other changes such as a organizational and thousands of layoffs shows that CEO Satya Nadella is firmly committed to new ambitions. So says Technology Business Research analyst Kelsey Mason.

HAMPTON, N.H. – The writing-off and shedding underperforming assets pivots Microsoft to pursue CEO Satya Nadella’s new ambitions.

Nadella continues to hone Microsoft’s strategic focus on what he describes as the company’s three ambitions: reinvent productivity and business processes (Office and Dynamics), build the intelligent cloud platform (Azure) and create more personal computing (Windows 10 and devices).

While shedding underperforming assets such as advertising and phones challenged FY4Q15 performance, it streamlines the Microsoft organization to focus efforts around Windows 10, Azure and Office 365. First-party device development will drive adoption of underlying enabling software and companion application assets to deliver the seamless Microsoft user experience.

Microsoft’s FY4Q15 results show continued success amidst large-scale shifts both internally and in the broader enterprise software market. Commercial Cloud revenue growth of 88% year-to-year contrasted with 7% year-to-year declines in commercial licensing demonstrates Microsoft’s ability to successfully migrate its customers to the cloud, particularly in the case of Office.

Realigning engineering efforts and secession from non-core businesses shows Microsoft’s commitment to revised corporate objectives

In June, Nadella announced a realignment of Microsoft’s engineering team to better support the company’s three key ambitions. TBR believes the realignment and related executive team shake-up will help Microsoft go-to-market more harmoniously, and break down some of the silos that have traditionally plagued the company.

Through the realignment, Scott Guthrie’s Cloud and Enterprise group will absorb the once-siloed Dynamics development team. TBR sees this has an opportunity for Microsoft to improve Dynamics’ position in the cloud space, as well as more closely integrate Dynamics ERP and CRM with Azure and the company’s analytics offerings. TBR believes the loose coupling of Office and Dynamics breeds opportunity for Dynamics to integrate with solutions competitive to Microsoft’s broader portfolio including Google Apps and Box.

In addition, Microsoft turned its display ads division over to AOL for ten years and made AppNexus its exclusive programmatic technology and sales partner in several global markets. Microsoft also announced the sale of a portion of Bing Maps to Uber. These changes signal Microsoft’s committed to its software and related services and devices.

Microsoft bundles technology to monetize the growing amounts of data

At its Worldwide Partner Conference in July, Microsoft announced the Cortana Analytics Suite, which bundles its Cortana personal digital assistant, Power BI and Azure services including Machine Learning, HDInsight, Stream Analytics, among others. Cortana Analytics Suite will enable users to interact with preconfigured analytics scenarios using Cortana’s psuedo-natural language interface. Microsoft targets developers with the suite, encouraging them to integrate the technology into their own applications.

Azure Stack helps Microsoft expand private and hybrid capabilities

In May Microsoft announced the release of Azure Stack, which combines Windows Server 2016, Azure Pack and Azure Service Fabric, enabling customers to build private cloud environments in on-premises data centers. These environments will offer identical functionality to Azure in the public cloud as it offers Azure IaaS, PaaS and management tools, while also addressing security concerns for customers not wanting to dive fully into public cloud.
To manage increasingly hybrid environments, Microsoft launched Operations Management Suite (OMS), which can manage customers’ environments regardless of the type of cloud (Azure, AWS, VMware, etc.) or on-premises asset.

The acquisition of [North Carolina-based] BlueStripe, an application performance management software vendor, bolsters OMS.

(C) TBR