5 Things Microsoft Corporation's Management Wants You to Know

Since Monday, shares of Microsoft have lost more than 11% of their value. Although the tech giant reported earnings that were largely in line with analyst estimates, the company's Windows business showed signs of weakness.

In its subsequent earnings call, Microsoft's management offered an explanation for the disappointing performance, and gave investors a few key points to keep in mind. Below are five of the most important quotes from Microsoft's recent earnings call.

Microsoft continues to see strong cloud growthAlmost all of Microsoft's growth is coming from the cloud: subscription services such as Office 365, Windows Azure, and Dynamics CRM. On the call, Microsoft's CEO, Satya Nadella, noted the strong demand Microsoft has seen for its cloud services in recent quarters:

In total, Microsoft's commercial cloud revenue rose 114% on an annual basis. That's certainly impressive, though it should be noted that last quarter its growth rate -- 128% -- was even higher.

Windows XP made for a difficult Windows compMicrosoft officially ended support for Windows XP last April, leaving a number of business users stuck with potentially vulnerable PCs. Those who were still running Windows XP, and did not wish to subject themselves to possible security breaches, upgraded last fall in record numbers.

That led to exaggerated Windows Pro revenue last year, which made this quarter's numbers look bad in comparison. On an annual basis, Windows Pro revenue contracted 13% last quarter, but Nadella argued that the contraction was not indicative of a larger move away from Windows.

Microsoft's phone ambitions remain with the low-endMicrosoft is now a phone manufacturer -- but with less than 3% of global market share, Windows Phone is far from a success. Last quarter, Microsoft's phone-related revenue actually contracted on a sequential basis, though the number of handsets sold rose. Nadella explained that Microsoft continues to focus on the low-end of the market to boost Windows Phone adoption.

Thinking about Windows profitabilityHistorically, Microsoft has always charged for its Windows operating system, but the rise of free alternatives have pressured its business model, particularly in the mobile space. Microsoft has begun giving away heavily discounted Windows licenses to its hardware partners for use on devices with smaller screens.

It's difficult, however, to judge the profitability of Windows on these devices. When asked, Nadella said that Microsoft plans to profit from these devices using cloud services as well as hardware, as in some cases, Microsoft now being the one building the device.

How to measure cross-platform progressUnder Nadella, Microsoft has been aggressive in bringing its services to other platforms. For example, it brought its Office productivity suite to Apple's iPad last year.

But how should investors judge Microsoft's success? According to Nadella, it is best to think in terms of subscribers, and demand for its cloud services.

The article 5 Things Microsoft Corporation's Management Wants You to Know originally appeared on Fool.com.

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