While Microsoft’s results confirm that the company continues its slow-and-steady drive to build its business around high-value enterprise services, Apple, its more star-studded PC industry sibling, makes the play itself for spreading the platform.
What have we learned as we head into the earnings week for both firms?
What’s going on with Mac vs. PC?
You can see what’s going on at Microsoft in great depth here. The relationships appear to be rising services revenue (especially around cloud and SaaS) while PC sales and licensing revenue continue a decline that preceded the COVID-19 pandemic.
When it comes to PC sales, Microsoft blamed its weaker results on COVID-related production shutdowns in China, which it says dragged down the entire PC market and reduced Windows sales. (In a related article, it’s interesting to note the stark difference between IDC and Gartner’s current PC sales forecasts.)
What Microsoft isn’t saying is that PC sales are also feeling the impact of growing interest in what Apple has to offer. The introduction of Macs with Apple Silicon has undoubtedly created a huge boost to the company’s fortunes, with consumers and enterprise customers investing in Apple’s new laptops rather than PCs.
The inconvenient truth is that due in part to the power of the iPhone, what had been traditional resistance to deploying Macs in the enterprise has evaporated for years. Yes, you’ll still find die-hard PC users who will argue that Macs aren’t computers, but when it comes to getting work done without the expensive tech support and access to cloud-based services that Microsoft offers and others, Macs seem to play like similar platforms. today.
“The way demand is growing and the expectations of the younger generations joining the workforce, Apple devices will be number one. [enterprise] endpoint by 2030,” Jamf CIO Linh Lam said recently.
For Microsoft Windows partners, any increase in Mac market share presents an additional challenge, as the PC market is highly competitive; margins are thin as manufacturers try to compete on price. Apple’s newly introduced M2 MacBook Air poses a real challenge for PC makers, given its computing performance per watt and sticker price of roughly $1,200. I predict that Apple will push hard on upgrading its entire M2 fleet over the next 12 months, setting the stage for the Next Big Thing in Macs, 3nm chips that will take Apple’s current power/performance, lead to several more levels.
We know from Apple supplier TSMC that it expects to start producing 3nm chips (presumably for Apple) next year, which itself implies a solid roadmap for future Mac development.
What’s happening in the clouds?
Cloud services are another big branch for Microsoft’s business. We also have data from Google, which this week confirmed that Google Cloud increased revenue by 35.6%. This contrasts with Microsoft’s cloud services (including Azure) which grew 20% in the quarter, compared to 26% in previous quarters.
Given that we know adoption of cloud services is increasing, this suggests intensifying competition among vendors in the enterprise cloud space. This is likely to pose an ongoing problem for smaller retailers, given how much share the big players command.
[Also read: Everything-as-a-service, Apple, and the future of business]
Apple also has a cloud services presence, but from a non-enterprise angle. Now, these range from consumer-friendly offers such as Apple Music to primarily business-focused offerings like Apple Business Essentials.
Apple will announce its latest financial results on Thursday, July 28, and while many in the industry insist on seeing it as a product-driven firm forever exposed to swings in device sales, others point to its passing. successful towards services and the powerful nature of its platform. as an essential force.
Citing Apple’s “industry-leading retention rates and expanding ecosystem of devices and services,” Morgan Stanley recently proposed a trillion-dollar raise still to be explored as Apple adds its own services.
What is happening in digital transformation?
The App Store also gives Apple a strong position from which to generate revenue from the enterprise’s ongoing digital transformation. From a recent report based on surveys of C-suite executives, Gartner says it does not expect enterprise technology spending to slow as business users realize the need to keep pace with digital change to improve efficiency and scalability.
“Implementing digital in a way that increases the productivity of workers, assets and working capital will be a must moving forward,” Gartner research vice president Randeep Rathindra said in a statement.
We’ll get a clearer picture of how future platform sales are likely to pan out when Apple shuts down its own data — but don’t ignore the power of its services lineup to drive revenue, though the next metaverse gold rush awaits Apple’s kiss of life in 2023. Apple executives will be hoping that, like the iPod, iPad and iPhone, history repeats itself. Meta less.
Please follow me I tweetor join me in the AppleHolic bar & grill and Apple Discussions groups on MeWe.
Copyright © 2022 IDG Communications, Inc.