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Microsoft, Amazon Reap Cloud Benefits

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

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Cloud services including AWS, Office 365, Azure have boosted Microsoft and Amazon financials

Microsoft has posted a modest rise in profits thanks to the growth of its Azure cloud and Office offerings.

And it was a similar story with e-commerce giant Amazon after it beat Wall Street expectations with a surprise profit, helped by rapid growth in its AWS cloud business.

PC Drag

Microsoft of course under the leadership of CEO Satya Nadella is seeking to transform the PC software behemoth into company with a cloud and mobile first outlook. And this approach seems to be paying some dividends, at least on the cloud front.

For the first quarter FY 2016 ending September 30, Microsoft posted a modest rise in profits after net income rose to $4.6bn (£3bn) from $4.5bn (£2.9bn) in the same year-ago quarter.

But there was not such good news on the sales side, as revenues plummeted sharply to $20.379bn (£13.2bn) from $23.2bn (£15bn) a year earlier.

“We are making strong progress across each of our three ambitions by delivering innovation people love,” said Satya Nadella. “Customer excitement for new devices, Windows 10, Office 365 and Azure is increasing as we bring together the best Microsoft experiences to empower people to achieve more.”

But it seems that Microsoft is paying the price for the decline in the PC market, as Personal Computing revenues declined 17 percent to $9.4 billion (£6bn). Windows OEM revenue declined 6 percent, but Microsoft insisted that this is performing better than the overall PC market, “as the Windows 10 launch spurred PC ecosystem innovation and helped drive hardware mix toward premium devices.”

And Windows Phone also continued to show weakness after Phone revenue declined 54 percent, “reflecting our updated strategy.”

There was some good news in that search advertising revenue grew 29 percent, as Bing US market share benefited from Windows 10 usage. And Xbox Live monthly active users grew 28 percent to 39 million.

Windows-10-Range-Lumia-950-950XL-jpgMicrosoft will be hoping that the recent product launch of Windows 10, the arrival of its flagship smartphones (the Lumia 950 and 950 XL), and the arrival of its first ever laptop with the hugely powerful 13 inch hybrid Surface Book, will transform its fortunes in the PC and mobile sector.

Amazon Cloud

Amazon meanwhile surprised Wall Street when it posted a surprise profit, thanks again to the strong performance of its cloud offering (AWS).

For the three months ending 30 September, Amazon posted a net profit of $79m (£51m) compared to a net loss a year earlier of $437m (£284m). Sales meanwhile also rose a staggering 23 percent to $25.3bn (£16.5bn) from $20.579bn (£13.3bn) a year ago.

During the period Amazon introduced four new tablets, including a Fire tablet for less than £50. And if you buy five tablets, you get a sixth one absolutely free.

“For the first time, we’re recommending you bring home a six-pack for the whole family,” said Jeff Bezos, founder and CEO of Amazon.com. “At a price of $50 for one or $250 for a six-pack, Fire sets a new bar for what customers should expect from a low-cost tablet.”

But it was the cloud that is the real growth driver for Amazon.

Indeed, Amazon has predicted that tat AWS could one day be larger than its e-commerce retail operation. Amazon Web Services posted a net profit $521m (£338m), on sales of $2.09bn (£1.3bn), up from $1.17bn (£759m) in the previous year.

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