Microsoft: component shortages won’t go away anytime soon

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Releasing its FY21 fourth quarter results, Microsoft revealed that its Surface and Windows revenues were negatively impacted by supply chain constraints. As remote working continued to fuel demand for PCs, Microsoft and its OEM partners had problems obtaining enough components, including chips, power cords, and other electronic components required for new ones. PC.

In the fourth quarter, Microsoft Surface revenue fell 20% to $ 1.38 billion in the quarter. Comparing the quarter to a year ago was difficult as Surface and other Windows PCs saw high demand as people had to buy PCs to allow them to work from home. CFO Amy Hood told analysts on the earnings call that Microsoft expects Surface revenue to continue to decline next quarter due to supply chain constraints.

Pressure on the supply chain will also continue to impact Microsoft’s Xbox game consoles and PCs made by its partners, company officials conceded. Hood told analysts that they expect Windows OEM revenue in the first quarter of FY22 to decline by an average to high figure, and Surface revenue to decline by a low teenage rate. Fourth-quarter figures released today show Windows OEM Pro revenue is down 2% from the quarter last year, and non-Pro OEM (consumer) growth is down 4%.

However, supply chain constraints do not appear to have an impact on how quickly Microsoft can continue to grow its cloud footprint. Hood and other officials expect Microsoft to continue growing its business activities in the cloud, including Azure, Office 365, and Dynamics 365.

Azure was up 51% (from an undisclosed base number) for the quarter and Dynamics 365 was up 49% from an undisclosed base – its third consecutive quarter of growth.

There is a lot of headroom to sell customers Microsoft’s most expensive Microsoft 365 / Office 365 E5 SKU, since only eight percent of Office 365 users currently use Office 365 E5, Hood noted. The number of consumer subscribers to Microsoft 365 / Office 365 is now 51.9 million, up from 50.2 million in the third quarter of FY21. And Office 365 Commercial products and services were up 20% from in the quarter of last year. (Microsoft did not disclose any new O365 / M365 Commercial subscriber count.)

Last year, during its fourth quarter earnings report, Microsoft officials referred to the spending weaknesses of small and medium-sized enterprises (SMBs) as affecting its various businesses. Based on today’s earnings report and forecast, this weakness in SME spending is over.


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