In 2016, Office was a lot more profitable than Windows. An analysis by The Motely Fool shows how important Microsoft Office is to their bottom line.
Office is the cash cow
What stands out is how profitable Microsoft Office has become. The push to ‘subscriptions’ (effectively software rental) has been a very smart move for MSFT’s bottom line.
2016’s results show the division that’s mostly Microsoft Office generated $26.4 Billion dollars of revenue. Deduct sales, general, admin and operating expenses leaves $12.4 Billion, a handsome 47% margin ‘operating income’.
Note: with Microsoft all the numbers are in Billions – mere millions don’t register.
For comparison, Windows PC revenue is a ‘mere’ $8.1 billion and that’s before expenses.
Amazingly, the after expenses return from Office was 50% higher than the total revenue (before expenses) for Windows!
A far cry from the days when Windows was the money maker and Office took second place.
The policy of ‘Office everywhere’ is paying off, combined with the greater revenue from Office 365 ‘subscriptions’.
In the past Microsoft used Office to reinforce sales of Windows and vice-versa. The arrival of tablets and smartphones, with no viable Microsoft alternative, forced that to change.
Now, Microsoft puts Office on any platform they can. Apple iOS and Mac, Android, web browser as well as Windows.
Of course, Office for Windows desktop is the ‘full’ Office with all the features. It will remain that way too.
But the apps for other platforms are enough for most people and easier to accept than a non-Microsoft alternative.