A Tale of Two Quarters, with Apple and Microsoft

POSTED BY James Moar
In Cupertino, Califonia, Apple reported a record 74.5 million iPhones shipped, driven by strong sales in China and other Asian markets. Over in Redmond, Washington, Microsoft sold a mere 10.5 million Lumias last quarter, while the costs of the Nokia acquisition still make a financial dent in the company’s fortunes.

iPad-and-Surface.jpgOther revenue streams tell a different story, and betray how different the two companies are, even if Macs and PCs are now based on very similar hardware. Apple’s quarterly service revenues sit at $4.8 billion, up just 9% on last quarter, despite the partnership with IBM starting to bear fruit. Meanwhile, Microsoft has increased its commercial cloud revenue by 114% in the same period. While the absolute revenue from these services has some way to go to catch up with Apple, Microsoft is becoming a resurgent force in the enterprise.

As our recently-released Tablets, Phablets & Hybrids report notes, productivity is becoming a key focus for tablets, and is driving an increase in hybrid computer use. The Surface Pro 3 has revived the Surface line – Microsoft notes $1.1 billion in revenue, an increase of almost 25%, after its release. This is a very different story for Apple, which didn’t see fit to mention iPads at all in its press release. The reality is a 22% quarter-on-quarter revenue decline for the line, alongside another fall in unit sales.

Microsoft has a lot of space to expand the Surface Pro range to the enterprise, while the currently dominant iPad must break into new markets or decline. Microsoft’s Surface devices may ultimately suffer a similar fate after several years as longer refresh rates take their toll, but by that time they are likely to have a stronger enterprise cloud position, which can then provide strong cloud-based revenues until device sales pick up again.