David Sacks, co-founder of business social-networking company Yammer, which was acquired by Microsoft in 2012, is leaving Microsoft.
Sacks tweeted today:
Microsoft sent a statement, saying:
We thank David for his commitment to Yammer and Microsoft and wish him the best in his future endeavors. Yammer has grown tremendously since the acquisition in 2012, and is now an integral part of Office 365 and used by more than 500,000 organizations. As part of our long-term plan, David has played an instrumental role over the past two years in building a strong leadership team to set a solid direction for Yammer as part of Microsoft Office 365 and our vision for enterprise social.
ZDNet's Mary Jo Foley noted that Sacks' departure comes as Microsoft is moving Yammer into the Office 365 and Outlook development teams, with a member from those Microsoft teams moving south to head the Yammer engineering team in San Francisco.
Microsoft had purchased Yammer for $1.2 billion in 2012. At the time, Microsoft was excited about Yammer's potential in business social networking, and CEO Steve Ballmer was especially enthused about Yammer's "viral adoption method" by which it grew its user base.
For a while, Microsoft regularly touted the growth in Yammer's number of registered users: From 5 million at the time of the acquisition to 8 million a year later in June 2013. Microsoft has not said how many registered Yammer users there currently are.
Microsoft beat Wall Street expectations for revenue but fell short in earnings per share in its fiscal fourth quarter earnings, reported today.
For the quarter ended June 30, Microsoft reported revenue of $23.38 billion, profit (net income) of $4.61 billion and earnings per share of 55 cents.
Analysts were expecting Microsoft to report for the quarter revenue of $23.01 billion with earnings per share of 60 cents and profit of $5.04 billion, according to a Bloomberg survey of analysts.
For the year-ago quarter, Microsoft posted revenue of $19.9 billion with earnings per share of 59 cents and profit (net income) of $4.97 billion. (Those figures reflected a $900 million write-down of Surface RT inventory related to a price-reduction offer for those devices. Adjusted for that write-down, Microsoft said earnings per share would have been 66 cents.)
Chris Suh, Microsoft's general manager of investor relations, said the lower-than-predicted earnings per share reflected the fact that Microsoft had not offered guidance on the impact its acquistion of Nokia's phone business, which closed in April. (Microsoft had not offered the guidance, he said, because "we didn’t have a point of view on the business that I would consider to be reliable enough for us to stand behind at that point.)
Suh said that taking into account the ongoing operations of the acquired Nokia business, plus some items including a catch-up on prior-year taxes that was recognized in the quarter, earnings per share for the quarter representing core Microsoft earnings growth would have been 66 cents.
For fiscal year 2014, Microsoft reported revenue of $86.83 billion, profit (net income) of $22.07 billion and earnings per share of $2.63.
Analysts were expecting Microsoft to report revenue of $86.46 billion with earnings per share of $2.69 on profit of $22.54 billion, according to a Bloomberg survey of analysts.
For the fiscal year 2013, Microsoft had posted revenue of $77.85 billion, earnings per share of $2.58 and profit of $21.86 billion.
During the earnings conference call, which will be webcast starting at 2:30 p.m., CEO Satya Nadella and CFO Amy Hood are expected to talk about the company's restructuring, following its acquisition of Nokia’s phone business, last week's announcement of 18,000 layoffs for the coming year, and tighter restrictions starting this month on the use of vendors and temps.
Here’s how the various groups within each of Microsoft’s two broad segments performed in the fourth quarter, according to Microsoft's news release:
Devices & Consumer:
Overall, this segment reported revenue of $10 billion, up 42 percent.
• Licensing (Licenses from Windows device manufacturers, consumer Windows, Windows Phone, Office consumer, and patents): $4.69 billion, up 9 percent.
Licensing revenue from Windows device manufacturers grew 3 percent.
The increase in revenue is also due to recognition of $382 million from the conclusion of the commercial agreement with Nokia.
The increases were offset by a decline in royalty revenue.
• Computing & Gaming Hardware (Surface, Xbox and Xbox Live subscriptions, second- and third-party video games, and peripherals. This category was previously called “Hardware.”): $1.44 billion revenue, up 23 percent.
Surface revenue was $409 million. Interestingly, Microsoft noted that the cost of revenue included inventory adjustments not just due to new generation devices (such as Surface Pro 3 going on the market) but also "a decision to not ship a new form factor" -- likely the much-rumored-about Surface Mini.)
Xbox platform revenue increased $104 million, or 14 percent, driven largely by console revenue. The company sold 1.1 million consoles to retailers.
• Phone Hardware (Windows Phone. This is a new category this quarter, established since the closing of the Nokia acquisition in April.): $1.99 billion.
The cost of the $1.99 billion revenue, though, was $1.93 billion, which includes amortization and the "impact of decisions to rationalize our device portfolio.
Following Microsoft's acquisition of Nokia's phone business, Microsoft sold 5.8 million Lumia smartphones and 30.3 million non-Lumia phones. Lower-priced phones drove a majority of the Lumia sales.
• Other (Bing and MSN, Office 365 Home and Office 365 Personal, first-party video games, marketplaces such as Windows Store, Windows Phone Store and Xbox Live transactions, as well as Microsoft retail stores): $1.88 billion, up 20 percent.
Bing search advertising revenue went up 40 percent, due mainly to higher revenue per search, increased search volume, and the end of the North American revenue-per-search guarantee payment sot Yahoo in the previous year. The increase was offset by an 11 percent decline in display ad revenue.
Office 365 Home and Office 365 Personal revenue increased $125 million, or 21 percent. There were 5.6 million subscribers, a gain of 1 million subscribers from the previous quarter.
Overall, this segment reported revenue of $13.48 billion, up 11 percent.
• Licensing: (Windows enterprise, Windows Server, SQL Server, Visual Studio, System Center, Office for businesses, Dynamics, Skype, Lync, SharePoint, Exchange, Windows Embedded): $11.22 billion, up 6 percent.
Windows volume licensing revenue increased 11 percent.
Revenue for server products grew $577 million, or 14 percent, driven largely by double-digit growth in SQL Server, System Center and Windows Server premium version.
Office commercial revenue, including Office 365, grew 4 percent.
• Other (enterprise services, cloud services, including Office 365 for businesses, Azure, Dynamics CRM Online): $2.26 billion revenue, up 44 percent.
Commercial cloud revenue grew 147 percent, due largely to triple-digit growth in commercial Office 365 and Azure. At the current subscriber rate, the commercial cloud businesses is expected to exceed $4.4 billion in revenue by the end of fiscal year 2015.
Microsoft shares closed flat today at $44.83 and were trading at around that price after-hours.
[The fuller story, running in the print edition of The Seattle Times July 23, 2014, is here.]
Microsoft is imposing new restrictions on those who work for the company through vendors and temp agencies. The new rules limit those workers to 18 months of access to Microsoft buildings and corporate networks, after which they will be required to take a 6-month break from access.
The move could affect tens of thousands of contractors who work at Microsoft in various roles from software development to content provision. (Microsoft has always declined to say how many such "external staff" it uses.)
The move also comes at a time when Microsoft is laying off 18,000 of its full-time employees and is reconsidering how it uses its vendor and temp staff.
The change, outlined in a memo sent Friday by Microsoft's Global Procurement team to external staffing agencies, says:
The policy change affects US-based external staff (including Agency Temporaries, Vendors and Business Guests) and limits their access to Microsoft buildings and the Microsoft corporate network to a period of 18 months, with a required six-month break before access may be granted again. If your staff does not have Microsoft building or network access, this policy change will not apply to or impact them. The policy went into effect July 1st, 2014...
Currently, most of Microsoft's contract workers are classified either as "v-dash" -- those who are contracted through vendors, or "a-dash" -- those who are contracted through temp agencies.
V-dash workers, prior to this policy change, could work indefinitely, until the project they were hired for ends. They could also be hired onto another v-dash position immediately after their last project ends.
So for v-dash workers, the new policy means that, whereas they could work indefinitely before, they will now have to take a 6-month break if their work requires access to Microsoft buildings or its corporate network.
A-dash workers, prior to this policy change, could work up to a year, after which they were required to take a 100-day break.
For a-dash workers, the new policy means that the amount of time they can work continuously has been extended, from a year to 18 months, but the break they are required to take, if their job requires network or building access, is now doubled.
"We're already aware of the fact that we're not FTEs [full-time equivalent employees]. We don't need another reminder," said one v-dash employee who asked not to be named. "A lot of the contractors are starting to look for new positions. Maybe that's what they [Microsoft] want. Maybe they just want to make it easier for us to leave on our own."
Microsoft couched the changes in terms of better protection for its intellectual property and confidential information.
"While network and building access may be required to effectively complete project work, we often have effective means of working together without granting access," according to the memo sent from the company's Global Procurement team. "This policy will help our sponsors to make thoughtful decisions regarding network and building access to strengthen protection of Microsoft’s confidential communication."
Microsoft spokesman Mark Murray said: "The new policy does not affect their [contractors'] work. It affects card key access and access to the Microsoft network. If a v-dash does not require access to the internal Microsoft corporate network or card key access to Microsoft buildings, then they can work on Microsoft projects indefinitely."
It is unclear how many of these contract workers would be able to work on Microsoft projects without access to the network or buildings -- or if that's even possible. That is something that will be evaluated in the next 18 months under the new policy, Murray said.
He said the new policy was designed, in part, to "help employees make thoughtful choices" about whom they grant network and building access to. "It's not clear that all of the access to the corporate network that's currently been granted is absolutely necessary for people to do their work," Murray said. "It's more been granted out of habit or out of default."
He acknowledged that "the company does want to carefully consider the volume of our use of external staff. But this particular policy is focused on protecting our confidential information and intellectual property."
Another category of external staff -- those working for outsourced supply companies such as those providing cafeteria workers and front-desk staff -- do not fall under this new policy. Those workers can work year-round without the required 6-month break in access.
Additionally, the new policy also affects any Microsoft employee (FTE) who left the company on or after July 1. Such former employees will now have to take a minimum 6-month break from access before they can begin an assignment as a vendor or temp for the company.
Here's the memo from the Microsoft Global Procurement team to external staffing agencies. And here's a memo sent by the company to internal employees who sponsor external staff (such as contractors who work for vendors and temp agencies).
[Update July 20: I asked Microsoft whether the new policy applies to external staff overseas as well. Company spokesman Mark Murray said: "We began this change in the U.S. because that is where our largest presence is, but we do plan to roll out this policy change globally, subject to local law.]Information in this blog post, originally published July 19, was corrected later that day. The post had incorrectly quoted Microsoft spokesman Mark Murray as saying a new policy on external staff's access to Microsoft buildings and networks was designed, in part, to “help employees make helpful choices" about who is granted access. Murray actually said the new policy was designed, in part, to "help employees make thoughtful choices" about who is granted access.
Microsoft announced the biggest layoff in its history Thursday as CEO Satya Nadella said the company will cut 18,000 jobs -- about 14 percent of the company’s workforce -- over the next year.
Of those cuts, at least 1,351 will come from the Puget Sound area. That's about 3 percent of the approximately 43,000 employees Microsoft has in this area.
Most of the cuts -- about 12,500 professional and factory positions -- are mainly former Nokia positions, with some Microsoft positions being eliminated because of job duplication, resulting from Microsoft's acquisition of Nokia, which closed in April.
Microsoft is starting today to eliminate 13,000 of the 18,000 jobs, with the majority of the remaining 5,000 to be notified over the next six months.
Some of the jobs from the remaining 5,000 will come from the Puget Sound area.
Indeed, "the emphasis on simplifying management structure and the fact that a lot of those corporate groups are here would imply that more local cuts are coming" as part of the 5,000 job holders who will be notified over the next six months, said analyst Sid Parakh of Seattle-based investment firm McAdams Wright Ragen.
The jobs being eliminated cut across multiple functions at Microsoft, though the company declined to specify which areas were hardest hit. (One definite area is Xbox Entertainment Studios, which Microsoft is shutting down.) The 1,351 local jobs that are starting to be eliminated today also cut across multiple functions, including marketing and engineering, a company spokesman said.
Microsoft will offer severance to those laid off and job transition help in many locations.
"My promise to you is that we will go through this process in the most thoughtful and transparent way possible," CEO Satya Nadella wrote in a memo sent to all employees this morning.
The cuts, he added, "are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment. ... It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas."
...(We) will simplify the way we work to drive greater accountability, become more agile and move faster. ... In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient
The company declined to say if, or how, the cuts will affect contractors and vendors, although Nadella alluded to changes that will "affect both the Microsoft workforce and our vendor staff" in his memo.
Stephen Elop, head of Microsoft's hardware division that includes the former Nokia phone business, also sent an email to employees today, in which he said the company plans to merge Nokia's former Smart Devices and Mobile Phone business units into one phone business unit.
The company will be focusing on the Lumia brand of Windows Phones smartphones, focusing on "delivering great breakthrough products" for its higher-end phones, while adding more lower-cost Lumia devices to increase Windows Phone sales. (Despite being in the market for nearly four years, Windows Phone still has only a tiny share of the worldwide smartphone market.) Microsoft will also no longer make new Android-based Nokia X phones, Elop said.
"It is particularly important to recognize that the role of phones within Microsoft is different than it was within Nokia," Elop said in his email. (Elop was also Nokia's CEO from 2010 to 2013.)
"Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft’s digital work and digital life experiences, while accruing value to Microsoft’s overall strategy," Elop wrote. "Our device strategy must reflect Microsoft’s strategy and must be accomplished within an appropriate financial envelope."
Another area Microsoft is cutting is Xbox original programming. Microsoft is closing the 2-year-old Xbox Entertainment Studios, which just three months ago outlined its plans for a slate of original TV programs for the Xbox Live service.
Studio executives Nancy Tellem and Jordan Levin and some from the studios team will remain to focus on a smaller group of original programs already in production such as a "Halo" TV series and a documentary series called "Signal to Noise," according to a memo from Xbox and Microsoft Studios head Phil Spencer.
The company will continue to provide interactive sports content such as NFL on Xbox, Spencer wrote, and its app partnerships with content entertainment and sports content providers will continue, Spencer wrote.
The company did not say how many people from Xbox Entertainment Studios will be laid off. The Studios has 35 employees in its Santa Monica, Calif. location, 120 in Vancouver B.C., and five in Redmond.
As a result of the job cuts, Microsoft expects to incur pre-tax charges of $1.1 billion to $1.6 billion over the next four quarters, including $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges, the company said in a news release.
Layoffs have been expected, following the closing on April 25 of Microsoft’s $7.5 billion purchase of Nokia’s phone business. That deal brought 25,000 Nokia employees – many of them located in Nokia’s factories worldwide – onto Microsoft’s payroll. As part of that deal, Microsoft had also committed to annual cost savings of $600 million for 18 months after the deal closes.
Layoff rumors had gained strength in recent weeks, particularly with the start of the company’s fiscal year this month. And Nadella himself hinted layoffs were coming in a memo outlining his vision for the company’s direction that he emailed to employees last week.
In that memo, he wrote about his vision of Microsoft as a “productivity and platform company for the mobile-first and cloud-first world,” and the need for sweeping cultural changes to make that happen.
“Nothing is off the table in how we think about shifting our culture to deliver on this core strategy,” Nadella wrote in his memo. “Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve. … Every team across Microsoft must find ways to simplify and move faster, more efficiently.”
Merv Adrian, an analyst with research firm Gartner sees the announcement today as Microsoft "taking an aggressive and activist posture to reshaping its organization along the lines that Satya has talked about. ... What we're looking at is a company cutting not out of weakness but a desire to reshape itself."
Sandeep Krishnamurthy, dean of the University of Washington Bothell School of Business, sees the layoffs as "a quite clear signal that the whole Nokia adventure is over."
Former CEO Steve Ballmer, who had pushed for the Nokia acquisition, had positioned the purchase as a major part of his move to transition the company into one that produces devices and services.
But Nadella, in his memo last week, said that "while the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy.”
"What we are now seeing is that there is quite a clear shift in direction" under Nadella, Krishnamurthy said. "This is the new CEO putting his imprint, no doubt about it."
Krishnamurthy says any effect on the local economy will likely play out over the next 6 months to a year, most notably in the local residential real estate market.
Paul Turek, an economist with Washington state's Employment Security Department, said the cuts are "likely to have some short-term impact on the area" but that King County is the one county in the state that's probably best positioned to take such a hit.
"The labor market's been moving forward, probably faster [in King County] than any other county in this state," he said. That indicates "a growing labor force that's attracting workers because of the stronger hiring prospects within the region."
The unemployment rate in King County in May was 4.7 percent, compared to 6.1 percent for the state as a whole, according to Turek.
This is only the second time Microsoft has instituted such large, sweeping cuts.
In 2009, in response to the global recession, Microsoft instituted several rounds of layoffs, resulting in a total of 5,800 jobs cut – or about 6 percent of its workforce then. Some 1,500 of the jobs cut were in the Puget Sound area.
The company regularly makes smaller job cuts, including a marketing restructuring in 2012 that resulted in some 200 layoffs, as it adjusts its businesses and priorities.
As of June 5, Microsoft had 127,104 employees (including the 25,000 former Nokia employees), 43,031 of them in the Puget Sound area.
The layoff news pushed Microsoft’s stock price up 3.7 percent to $45.71 in early trading, but it gave up much of its gains and closed Thursday at $44.53, up 45 cents, or 1 percent.
[Here's the story running in the print edition of The Seattle Times July 18 on the layoffs.]
With rumors of large, company-wide layoffs looming, Microsoft reportedly has plans to cut 1,000 jobs from its mobile phone unit in Finland.
That's according to Finnish daily newspaper Helsingin Sanomat, which also reported that half of that 1,000 would come from the closing of a former Nokia research and development unit in northern Finland, according to Reuters.
Microsoft took on an additional 25,000 former Nokia employees when the software giant's deal to acquire the Finnish phonemaker closed in April. The former Nokia employees work in more than 130 sites in 50 countries. 4,700 of them are in Finland.
Microsoft currently has about 127,000 employees, with some 43,000 of them in the Puget Sound area.
Layoff rumors have swirled ever since the close of the Nokia acquisition, and have gained strength in recent weeks, particularly with the start of the company’s fiscal year this month. CEO Satya Nadella hinted of layoffs to come in a memo outlining his vision for the company’s direction that he emailed to employees last week.
Nadella set a "core strategy" for Microsoft of being a "productivity and platform company for the mobile-first and cloud-first world."
As part of making that happen, sweeping cultural changes would have to happen, he said.
"Nothing is off the table in how we think about shifting our culture to deliver on this core strategy," he wrote in his memo. "Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve. New partnerships will be formed. Tired traditions will be questioned. Our priorities will be adjusted."
Microsoft CEO Satya Nadella emphasized his productivity, dual-user and cross-platform goals in his keynote this morning at the Worldwide Partner Conference being held in Washington, D.C.
(A replay of the keynote is available here.)
Nadella, speaking before an audience of thousands of Microsoft partners from around the world, talked of his vision of building great experiences for "dual users" -- people who use technology for both work and the rest of their lives.
It starts with building "great experiences individually" for products including Outlook, Skype and OneDrive, he said. But "it's not just about any one of these applications. It's not the application silos themselves. We are building an operating system for human activity across all of their daily lives, across all of their devices. Simply saying BYOD (bring your own device) is not enough. We have to harmonize this dual usage."
By "all of their devices," Nadella wasn't just talking about Windows devices.
Nadella, who has already released Office for iPad, emphasized his cross-platform aspirations.
He wants to see icons for Microsoft services and apps on all screens, from smartphones to smart TVs.
"They're all entry points for us as an ecosystem," he said. "So that means we get to have an opportunity to be able to have anyone entering from any device into our ecosystem."
Nadella talked briefly about his goals for first-party Windows hardware as being "optimized for productivity experiences" and (in a bid to reassure hardware partners) as a spur to "stimulate demand for the entire ecosystem."
He also spoke about "making Windows stand out as the most personal computing experience" with user interfaces such as touch, gesture and speech recognition.
And he talked about the company's cloud OS, tools for developers, and gave a demonstration of Skype Translator, a real-time conversation translator that will be released in beta form later this year.
Nadella alluded to big changes coming to the company -- saying all the things he had talked about will happen only "if we are successful in renewing our culture" -- but didn't get into specifics of how that renewal would happen.
He said the company would show boldness and "courage in the face of opportunity."
Earlier in the morning's keynote address, presenter Tony Prophet, a Microsoft corporate vice president of Windows Marketing, showed a slide with some statistics related to Windows, including the stat that there are 1.5 billion Windows devices (including older desktop PCs as well as Windows phones and tablets).
Here's the slide:
Prophet did not offer any news on future Windows releases.
Specifically, the companies are promising to bring more than 100 industry-specific apps and IBM big data and cloud services (including device management, security, analystics and mobile integration) to iOS devices. IBM is also offering new packages for device activation, supply and management, while Apple is offering service and support more tailored to enterprise needs.
So what does the deal mean for Microsoft, which has a strong presence in the enterprise but is still battling to get its smartphones and tablets into the hands of more business users?
Not all that much, according to some analysts.
"I’m not sure it’s going to wind up having any explicit effect," said Wes Miller, an analyst with independent research firm Directions on Microsoft, who says he sees the partnership simply as a matter of "a company that doesn't have a strong enterprise focus, and one that does, working together to harmonize the interest of both.
Where the partnership might affect Microsoft is in the company's aspirations to grow the number of users for its Windows Phone and Windows tablets, including the Surface.
"I definitely don’t think it’s good news for the tablet future for Microsoft," Miller said, since IBM will now have an incentive to recommend Apple's devices, rather than Microsoft's or another company's, when it provides services to its customers.
But that's offset by the simple fact that IBM isn't the only consultancy that businesses use, he added.
Michael Cherry, also an analyst with Directions on Microsoft, said a lot will depend on what these industry-specific apps will look like -- how good they are and how well IBM integrates them into its management tools.
If the apps are very good, then "Microsoft is going to eventually have to come up with something that competes with those applicaitons," Cherry said. "The dilemma for Microsoft then is: Do you produce those apps for Surface first or iOS first?"
Trip Chowdhry, an analyst with Global Equities Research, wonders if the timing of the announcement, coming a few days before IBM and Apple each make their quarterly earnings announcement, might indicate that the companies have not reached their revenue expectations.
He believes the companies announced the partnerships "from a position of mutual weakness," saying that cloud service providers such as Microsoft, Amazon and Google have been logging strong enterprise wins since March.
Shortly after Satya Nadella took over as CEO of Microsoft in February, he emphasized the reality of a Microsoft that had a lot of catching up to do in certain areas, and said the company was approaching that reality with a "challenger mindset."
That message is also coming across clearly today at the company's Worldwide Partner Conference in a keynote address from Chief Operating Officer Kevin Turner.
About 16,000 people are attending the company's annual conference for partners, running through Thursday, being held this year in Washington, D.C.
During the keynote, Turner said that while the company still has 90 percent share among PC operating systems, its share among all devices -- including smartphones and tablets as well as PCs -- is only 14 percent.
"The reality is, the world's shifted, the world's evolved," Turner said.
While acknowledging that new reality, Turner also put it in terms of an opportunity for Microsoft to grow its market share.
Microsoft is now coming from a "challenger mentality," he said, which means having a mindset of disruption, differentiation and speed in how it approaches things.
"The reality is, the transformation is accelerating," he said. "It's going to come quick. It's going to come quicker."
He also talked about the company's emphases on cloud, mobility, social business intelligence, big data and security, as well as its focus on competition and customer service.
"Obsessing about our customers is really important," he said.
CEO Nadella is expected to give the keynote address on Wednesday, starting at 5:45 a.m. PT. It will be livestreamed at www.digitalwpc.com.
For years, Microsoft has held its annual company meeting in September.
This year, under new CEO Satya Nadella, the meeting will be held in July, as part of a weeklong series of events called oneweek. The oneweek events are intended to inform employees about, and inspire them to engage in, the company's vision and strategy for the upcoming fiscal year.
It made better sense for those events to be held at the start of the company's fiscal year in July, rather than in September, a Microsoft spokeswoman said.
The company meeting will be held July 28 from 8 a.m. to noon at the Washington State Convention Center. As in previous years, it will be webcast to employees worldwide. It is not open to press or the public.
Also part of oneweek are hackathons, scheduled for July 29-30, with a live hackathon event to be held on the Microsoft campus' soccer field; and a product fair to be held July 30-31 at The Commons on campus. Those events are also not open to the public.
Microsoft has acquired San Jose-based InMage, which develops backup and disaster recovery systems for businesses.
Calling InMage "an innovator in the emerging area of cloud-based business continuity," Microsoft said in a blog post today that: "Our customers tell us that business continuity – the ability to backup, replicate and quickly recover data and applications in case of a system failure – is incredibly important. ... This acquisition will accelerate our strategy to provide hybrid cloud business continuity solutions for any customer IT environment, be it Windows or Linux, physical or virtualized on Hyper-V, VMware or others. This will make Azure the ideal destination for disaster recovery for virtually every enterprise server in the world."
Microsoft said it's now working to integrate the InMage Scout technology into its Azure Site Recovery service, and plans to enable data migration to Azure with InMage Scout. InMage's customers can continue to use its products and services.
Terms of the deal were not disclosed.
Microsoft CEO Satya Nadella, who ascended to the top position in February, today outlined his "productivity and platforms" direction for the company and hinting at changes to come.
In an interview this morning, Nadella talked about the thinking that led to the vision outlined in the memo to employees.
In the nearly six months he's been on the job, he said, "the main thing I've been obsessed about is: 'What is Microsoft's unique contribution in a mobile first, cloud first world.' That's what led to the focus on productivity and platforms."
Nadella emphasized that his definition of productivity was far broader than what people typically think of the term. Beyond just the production of documents, spreadsheets and slides, Nadella thinks of productivity as the ability to save people time and to allow them to do things better, with tools that can predict things and work on people's personal behalf.
And while Microsoft offers those productivity services and tools, Nadella also sees the company's platforms as allowing access to competitors' offerings, such as those of Salesforce.com or Dropbox.
While the direction Nadella outlined might seem to focus more on business customers, he said he doesn't think in terms of there being a business/consumer divide among users.
"I fundamentally believe that everybody on the planet is a dual user" -- whether a parent with a professional job or a student who wants their technology to work for both school and for play or life in general, he said. "The question is: How are you able to organize your information, your tasks, and get stuff done spanning those different roles. Nobody lives in isolation."
The task for Microsoft is to "build applications and platforms that understands that rich context" -- that understands automatically, for example, when the user to working on something related to their family life or to their work life.
He emphasized his support for Xbox -- "one of the greatest consumer franchises out there," he called it, adding that Xbox Live is "an amazing service for us, in terms of fan base."
He said he would talk more about Microsoft's recently-closed acquisition of Nokia during the company's quarterly earnings call Tuesday. "We're not in hardware for hardware's sake," he said. "We're in hardware to be able to express all our platform and productivity software in a way that's unique."
Nadella declined to talk about rumors of pending layoffs.
He did talk about the need for cultural change at Microsoft to align with his vision for the company.
"Any strategy gets eaten for lunch if you don't have culture that backs it up," he said. "The main call here is: 'Let's not get caught up in any past dogmas in terms of how work gets done. I want us to be as innovative about processes as we are about the innovations themselves."
His memo comes at the beginning of Microsoft's fiscal year 2015 and ahead of several company events including its Worldwide Partner Conference next week; and the MGX internal global sales meeting and a series of employee events (including the annual employees meeting), called "oneweek," happening at the end of this month.
Microsoft CEO Satya Nadella honed his vision for the company today in an email sent to all employees in which he talked about Microsoft as a "productivity and platform company for the mobile-first and cloud-first world. We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more."
The email, sent as the company begins its fiscal year this month, also hinted at changes to come that will be announced later this month.
From the day he was appointed to succeed former CEO Steve Ballmer in February, Nadella has emphasized his vision of a "mobile first, cloud first" world. He later added to that, talking about "ubiquitous computing" and "ambient intelligence" in which computing devices are all embedded all around us, taking in reams of data and using it to learn about us in order to operate on our behalf.
He also talked then about focusing intently on what Microsoft could uniquely do.
Today, he clarified and expanded on all that in the email he sent.
During the last months of his tenure, Ballmer had set a direction for the company as a "devices and services" one.
Nadella said today that "while the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy."
At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world. We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more. ...
Productivity for us goes well beyond documents, spreadsheets and slides. We will reinvent productivity for people who are swimming in a growing sea of devices, apps, data and social networks. We will build the solutions that address the productivity needs of groups and entire organizations as well as individuals by putting them at the center of their computing experiences. We will shift the meaning of productivity beyond solely producing something to include empowering people with new insights. We will build tools to be more predictive, personaland helpful. We will enable organizations to move from automated business processes to intelligent business processes. Every experience Microsoft builds will understand the rich context of an individual at work and in life to help them organize and accomplish things with ease.
Though Nadella has been emphasizing a "mobile first, cloud first" world from Day 1, Microsoft's operating systems still hold only a tiny share of the world's current mobile devices such as smartphones and tablets.
Nadella addressed that obliquely, saying that; "Microsoft has a unique ability to harmonize the world's devices, apps, docs, data and social networks in digital work and life experiences so that people are at the center and are empowered to do more and achieve more with what is becoming an increasingly scarce commodity – time!"
He also said the company would think of every technology user as a potential "dual user" -- one who uses technology at both work and/or school, as well as in their personal life.
"Across Microsoft, we will obsess over reinventing productivity and platforms. We will relentlessly focus on and build great digital work and life experiences with specific focus on dual use.," Nadella wrote.
Nadella said in the email that he would talk more about what the company will be doing to focus on the core on July 22, when the company will be announcing its fiscal fourth-quarter earnings.
Nadella also hinted at more sweeping change to come: "Over the course of July, the Senior Leadership Team and I will share more on the engineering and organization changes we believe are needed," he wrote.
There have been rumors that employees are bracing for layoffs, related to Microsoft's completion of its Nokia acquisition earlier this year. That acquisition brought some 25,000 Nokia employees onto Microsoft's payroll.
Nadella did not address those rumors in the email he sent today.
He did, however, talk about some changes that he believes will enable the company to be more nimble and driven by customer needs and measurable outcomes. He wrote:
Nothing is off the table in how we think about shifting our culture to deliver on this core strategy. Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve. New partnerships will be formed. Tired traditions will be questioned. Our priorities will be adjusted. New skills will be built. New ideas will be heard. New hires will be made. Processes will be simplified. And if you want to thrive at Microsoft and make a world impact, you and your team must add numerous more changes to this list that you will be enthusiastic about driving. ...In order to deliver the experiences our customers need for the mobile-first and cloud-first world, we will modernize our engineering processes to be customer-obsessed, data-driven, speed-oriented and quality-focused. We will be more effective in predicting and understanding what our customers need and more nimble in adjusting to information we get from the market. We will streamline the engineering process and reduce the amount of time and energy it takes to get things done. You can expect to have fewer processes but more focused and measurable outcomes.
He also said the company would be investing in "enhanced training and development and more opportunities to test new ideas and incubate new projects" as part of the larger changes.
Though there's been speculation (as there always is) that Microsoft might spin off Xbox, Nadella made a point of emphasizing the Xbox's importance to the company.
Though the Xbox doesn't necessarily fit into Nadella's vision of Microsoft's core purpose, "as a large company, ... it's important to make smart choices on other businesses in which we can have fundamental impact and success," he wrote.
His view is that technologies that emerge from working on Xbox efforts -- such as core graphics and speech recognition -- also benefit the company's productivity focus. "Bottom line, we will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft," he wrote.
Read the whole email here.
[This story is running in the print edition of The Seattle Times July 10, 2014.]
Peter Lee’s mission at Microsoft is to think big, think far and think unconventionally — and to get others to do the same.
As head of Microsoft Research (MSR), Lee is shaking things up at one of the largest computer-science research organizations in the world. Its researchers’ work has been incorporated into just about every company product, from Azure to Xbox, Bing to Windows.
But the division has also taken criticism for not helping Microsoft innovate enough, allowing companies with smaller research and development budgets, such as Apple and Google, to leap ahead in crucial areas.
Shareholders have wondered whether Microsoft gets enough in return for the $10 billion a year the company spends on R&D; — a relatively small portion of which goes to Microsoft Research.
The task before Lee, who became head of the organization last year, is to balance the pure research for which his division is best known with more immediately applicable work, all the while focusing resources on what could best lead to the next big thing.
Some of the changes recently put into place, including embedding at least one of Microsoft’s advanced researchers in each of the company’s product planning teams, have come from above, as a continuation of a larger companywide restructuring that started last year.
That reorganization, begun by former CEO Steve Ballmer and continuing under new CEO Satya Nadella, is geared toward fostering more innovation and collaboration.
Others come from Lee himself, such as making sure his managers have strategies for, and can show achievements in, each of four quadrants: Research that solves immediate problems; improves existing technologies; is disruptive and game-changing; or is purely curiosity-driven and exploratory.
The intent is to have a portfolio of research activities that together form an innovation pipeline, where blue-sky ideas feed into industry-changing inventions, which then help with the shorter-term activities.
Some of those changes have caused discomfort. But that’s not necessarily a bad thing, Lee believes.
“It’s delicate because, on the one hand, you need creative discomfort to spark creative thought, to think out of the box,” Lee says. “On the other hand, researchers really need stability. It’s always a struggle to find the right balance.”
[Continue reading the story here.]
Even not-so-bad news counts as good news for the PC market these days.
In the second quarter of this year, worldwide PC shipments either remained largely flat (according to research firm Gartner) or declined only slightly (according to research firm IDC).
According to Gartner, 75.8 million PCs were shipped in the second quarter this year, a 0.1 percent increase from the second quarter of 2013. It was good news after eight previous quarters of declining shipments.
IDC, meanwhile, said 74.4 million PCs were shipped in the second quarter, representing a year-over-year decline of 1.7 percent. It was the smallest decline since the second quarter of 2012 and better than IDC's projection of a 7.1 percent decrease.
Both research firms pointed to growth in mature markets such as the U.S., Canada and Europe, but declining shipments in emerging markets.
IDC attributed the better-than-expected results to businesses looking to replace PCs running Windows XP, which Microsoft ended support for in April after more than a decade. IDC also said consumer-side shipments were stronger than expected, especially for lower-priced PCs, including Chromebooks.
PC shipments in emerging markets declined, though, which IDC said was due to weaker economies and political issues.
Gartner analyst Mikako Kitagawa attributed the decline in emerging markets to the rise of low-cost tablets.
"These low-cost tablets continue to take spending from new PC units, meaning that it will take more time for PC sales to stabilize in emerging markets," she said in Gartner's news release.
Kitagawa also said the second-quarter results suggest that the move by consumers from PCs to tablets and smartphones has peaked.
"We are seeing a slowdown in premium tablet sales, which have already penetrated a large number of households," she said. "PCs are now growing off a smaller installed base of newer devices, with more engaged users. Therefore, we expect to see slow, but consistent, PC growth."
Separately, Gartner predicted worldwide combined shipments of PCs, tablets, ultramobiles and mobile phones will reach 2.4 billion units this year -- up 4.2 percent from last year.
The company predicts that business upgrades from Windows XP and the general business replacement cycle will help the PC market. It also predicts that tablet sales will slow -- though still show an increase of 23.9 percent from last year -- while mobile phone sales will increase 3.1 percent from last year.
Gartner forecasts Windows devices will account for about 14 percent of all device shipments this year, while Android will account for 48 percent, and iOS/Mac OS 11 percent.
Here's Gartner's chart showing second-quarter PC shipments:
And here's IDC's chart:
Microsoft says it's disrupted its 10th malware -- one that could be spread by infected removable drives such as USB flash drives, and that could lead to giving backdoor access to a user's computer.
Microsoft said today it filed a civil lawsuit on June 19 against two foreign nationals and a U.S. company, Vitalwerks Internet Solutions (doing business as No-IP.com), for their roles in "creating, controlling, and assisting in infecting millions of computers with malicious software."
Microsoft is accusing Kuwaiti national Naser Al Mutairi and Algerian national Mohamed Benabdellah of writing and distributing the Bladabindi and Jenxcus malware, respectively. The company is accusing No-IP of owning infrastructure that cybercriminals frequently use to infect victims with the malware.
The Bladabindi malware family can steal sensitive information and give a hacker backdoor access to the victim's PC. It can also download other malware. It can be spread through infected removable drives, malicious links, hacked websites or be downloaded by other malware.
Jenxcus is a worm that is typically bundled with other programs and that can be spread through removable drives. It can allow a victim's PC to be controlled by a remote attacker.
Microsoft says the malware was detected more than 7 million times in the past year by Microsoft anti-virus products, though the company did not specify how many people or computers were infected.
Microsoft advises using the Microsoft Malware Removal Tool, among other steps that are included in the links above.
As part of its disruption of the malware, Microsoft had sought, and been granted, a court order letting Microsoft become the "the DNS authority for the company’s 23 free No-IP domains, allowing us to identify and route all known bad traffic to the Microsoft sinkhole and classify the identified threats," Microsoft said.
That move apparently caused a sizeable number of legitimate connections to go dark.
"Millions of hostnames have gone dark and millions of our users have been put out of service," No-IP CEO Dan Durrer said in a blog post Wednesday.
No-IP had said, in a blog post earlier this week, that it was surprised by Microsoft's actions:
We have a long history of proactively working with other companies when cases of alleged malicious activity have been reported to us. Unfortunately, Microsoft never contacted us or asked us to block any subdomains, even though we have an open line of communication with Microsoft corporate executives. ...
We have been in contact with Microsoft today. They claim that their intent is to only filter out the known bad hostnames in each seized domain, while continuing to allow the good hostnames to resolve. However, this is not happening. Apparently, the Microsoft infrastructure is not able to handle the billions of queries from our customers. Millions of innocent users are experiencing outages to their services because of Microsoft’s attempt to remediate hostnames associated with a few bad actors.
Had Microsoft contacted us, we could and would have taken immediate action. Microsoft now claims that it just wants to get us to clean up our act, but its draconian actions have affected millions of innocent Internet users.
On Thursday, No-IP reported that all 23 domains that had been seized by Microsoft were now back in No-IP's control. "It may take up to 24 hours for the DNS to fully propagate, but everything should be fully functioning within the next day," No-IP said in a blog post.
Microsoft and Canon have reached a cross-licensing agreement giving each company licenses to the other's patent portfolios.
The agreement covers a broad range of products and services, including digital imaging and mobile consumer products, the companies said in a news release.
Terms of the deal were not disclosed.
Microsoft has signed many companies to such agreements -- including ones with companies that use the Android operating system, which Microsoft contends uses Microsoft's patented technologies. The company says it's entered into more than 1,100 licensing agreements since it launched its intellectual property licensing program in December 2003.
Microsoft has opened on its Redmond campus the first of what it calls "Transparency Centers"-- places where the company can show local governments what it's doing to keep their data secure and to reassure them that they are not providing back-door channels for snooping from, say, the U.S. government.
"Our Transparency Centers provide participating governments with the ability to review source code for our key products, assure themselves of their software integrity, and confirm there are no 'back doors,'" Matt Thomlinson, Microsoft's vice president of trustworthy computing security, wrote in a blog post today.
The issue is pressing for Microsoft and other U.S. tech companies that do business globally. They say they are losing business from foreign customers who are wary of trusting their data to U.S. companies, after whistleblower Edward Snowden's revelations of the U.S. National Security Agency's surveillance program involving tech companies such as Microsoft, Google and Yahoo.
Since those surveillance programs were revealed last year, the tech companies have been fighting back, lobbying Congress to put limits on the government's surveillance activities, battling in court to be allowed to release more information on national security requests, and increasing encryption on their services. Recently, Microsoft has been fighting in court to resist a U.S. search warrant for customer emails held in one of its data centers overseas.
Microsoft announced in January that it would be opening several Transparency Centers, in Brussels and other locations around the world.
The company also said today that it's strengthened encryption to its Outlook.com and OneDrive services.
Update June 27:
Microsoft on Thursday posted an explanation of what caused Tuesday's Exchange Online issues.
Rajesh Jha, corporate vice president of Office 365 Engineering, wrote in a blog post:
In the case of the Exchange Online issue, the trigger was an intermittent failure in a directory role that caused a directory partition to stop responding to authentication requests. This caused a small set of customers to lose email access. Given the unique nature of this specific failure, the recovery time was prolonged but the impact was still contained to a small set of customers. Unfortunately, the nature of this failure led to an unexpected issue in the broader mail delivery system due to a previously unknown code flaw leading to mail flow delays for a larger set of customers. Our recovery strategy was two pronged: 1) We partitioned the mail delivery system away from the failed directory partition and 2) directly addressed the root cause for the failed directory partition. In addition to fixing the root cause trigger, we are working on further layers of hardening for this pattern.
While we have fixed the root causes of the issues, we will learn from this experience and continue improving our proactive monitoring, prevention, recovery and defense in depth systems.
Jha also acknowledged that: "During the Exchange Online issue, we also experienced a problem with our Service Health Dashboard (SHD) publishing process, meaning not all impacted customers were notified in a timely way which we realize was frustrating and this has since been addressed." Customers will be getting a post-incident report in their service health dashboards with details of what happened, how Microsoft responded and what it's doing to prevent similar incidents in the future, he said.
The Exchange Online issue Tuesday, Jha added, was unrelated to the problems Monday with Lync Online, in which there was a "brief loss of client connectivity in our North America datacenters due to external network failures. Even though connectivity was restored in minutes, the ensuing traffic spike caused several network elements to get overloaded, resulting in some of our customers being unable to access Lync functionality for an extended duration."
Microsoft says it's resolved the problem with Exchange Online that led to some customers not being able to send or receive emails.
The company issued a statement this afternoon, saying:
On Tuesday, June 24th, 2014, at approximately 6:30 AM EDT, some North American customers experienced email delays with Exchange Online. The issue has since been resolved and the service is now functioning normally. We sincerely apologize to our customers for any inconvenience this incident may have caused and continuously strive to improve our service and using these opportunities to drive even greater excellence in our service delivery.
Some Office 365 and Exchange Online customers from different locations around the U.S. are reporting problems accessing their emails.
The users are unable to send and/or receive their Outlook emails, according to the posts in the Office 365 community forum.
The problem appears to be with Exchange Online, Microsoft's hosted email service, which can be purchased as a stand-alone email service or as part of an Office 365 plan that includes Office, SharePoint, and Lync.
Microsoft support earlier today posted in the forum, saying: "Engineers are continuing to investigate the underlying root cause of degradation to the portion of capacity responsible for facilitating connection requests to the Exchange Online Service"
Microsoft has issued a statement, saying: "Some Exchange customers are experiencing email delays. Our engineering team is actively working to resolve this issue. We recommend customers visit the service health dashboard for real-time updates."
This follows on the heels of Monday's Lync outage. Microsoft did not indicate whether the outages are related.
Seattle Seahawks fullback Derrick Coleman and wide receiver Doug Baldwin will be meeting and greeting shoppers Saturday afternoon at the Microsoft Store in Bellevue Square -- part of a series of promotional activities for the Surface Pro 3.
Baldwin and Coleman are scheduled to appear from 1:30 to 2:30 p.m. Family activities are scheduled from 2:30 to 3:30 p.m. There will also be prizes and giveaways.
It's all part the "Summer Celebration" events that 10 Microsoft Stores across the country are holding Saturday t0 mark the launch of the Surface Pro 3 last week.
The Surface Pro 3 is the latest version of Microsoft's first branded computing device, and one that Microsoft is positioning as a tablet that can replace your laptop. The company is even offering up to $650 in Microsoft Store credit for people who trade in certain MacBook Air models and purchase a Surface Pro 3. The offer is good until July 31 or while supplies last.
Two Microsoft alumni groups announced today that they are merging into one.
The Microsoft Alumni Foundation, which focuses on philanthropy, will now become a program under the 10,000-member Microsoft Alumni Network, according to Jeff Raikes, chairman of the newly combined board.
Raikes, the current chairman of the Microsoft Alumni Foundation board, is co-founder of the Raikes Foundation, former CEO of the Bill & Melinda Gates Foundation and a former Microsoft executive.
The combined alumni organization's mission is "to foster and build a broad alumni network where former Microsoft employees can connect and network with each other, and receive discounts and other membership privileges," according to a news release from the group.
Some of the privileges, at the $99-per-year basic membership level, include a subscription to Office 365 Home and access to the company store. The $125-a-year premium membership level includes additional benefits such as access to exclusive events and half off paid events. All former full-time Microsoft employees (i.e. those who possessed a “blue badge” security identification card) are eligible to join the organization.
There are about 100,000 former Microsoft alumni worldwide, about 40,000 of which are in the Pacific Northwest, the network said.
Microsoft today introduced the Nokia X2, the newest in a family of Nokia smartphones running on a forked version of the Android operating system.
The X2 has a 4.3-inch display, 5MP rear camera, Qualcomm Snapdragon 20 processor, 1GB of RAM, and features such as Fastlane to access recent apps, an apps list from which people can pin items to the home screen, and a pull-down notification tab, according to Microsoft. It will start rolling out globally in July and sell for 99 euros.
Microsoft says it has no plans to introduce the Nokia X2, or others in the Nokia X range, in the U.S. "We believe the U.S. market is well-served by our Lumia range of Windows Phones," the company said in a statement.
Nokia in February introduced the Nokia X, X+ and XL, all based on Google's open-source Android operating system. The phones run Android apps but are all tied by default into Microsoft's services such as Skype, OneDrive and Outlook.com. They, like the X2, are being targeted toward the emerging market, or, as Microsoft (and Nokia before it) put it: the "next billion" people to get into mobile Internet and cloud services.
The move was seen as targeting two key weaknesses in Nokia’s and Microsoft’s 3-year-old partnership in which Windows Phone was Nokia's primary smartphone operating system. But the ecosystem was hampered by a comparative lack of apps and it needed to be able to sell cheaper smartphones in emerging markets.
There was a question, though, after Microsoft closed its acquisition of Nokia in April, whether Microsoft would continue producing this line of Android phones.
Microsoft said in its news release today that the company "continues to invest in services for the Nokia X family," adding that the Nokia X phones were driving "strong uptake of services such as Skype and OneDrive," and that the company has introduced new services to the lineup including OneNote and Yammer -- now available for download in the Nokia Store.
The company also said the Nokia X is the top-selling smartphone in Pakistan, Russia, Kenya and Nigeria, and is the third top seller in India.