Another success over the past decade is the diversification that has taken place. Although Office still represents a big chunk of Microsoft’s profits, there are plenty of fast-growing businesses within the company. Microsoft now has 16 businesses that generate over $1 billion in revenue annually, including Windows Server, Xbox, SQL Server, Dynamics, Windows Azure, and cloud-based Office 365.
Although Microsoft seems irrelevant to many on the consumer side, the company dominates enterprise. Most of the company’s profits come from businesses and not consumers, and the enormous market share of Windows and Office among enterprise users is unlikely to change any time soon.
Windows Phone, which has a very small market share in the U.S., is actually doing quite well in certain markets. In Latin America, Windows Phone is now the No. 2 phone operating system, overtaking iOS. This is a huge development for Microsoft, and I suspect that eventually Windows Phone will be No. 2 worldwide.
An interesting twist in the mobile phone market, another Microsoft success, is the royalty income the company generates from sales of Android devices. Google Inc (NASDAQ:GOOG), at least according to Microsoft, violated various patents when creating Android, and instead of Microsoft suing Google Inc (NASDAQ:GOOG), it has signed royalty deals with the smartphone manufacturers that use Android. Although the exact figures aren’t reported by Microsoft, it’s estimated that the company receives as much as $8 per Android device. With deals signed covering 80% of the U.S. Android phone market, Microsoft could generate hundreds of millions or even billions of dollars this year from Android royalties.
This is an interesting situation because it puts a cost on using the free Android operating system. With Microsoft charging a fee to use its Windows Phone OS, these royalties put the two operating systems on more equal footing, possibly enabling low-cost Windows phones to be comparable in price with low-cost Android phones.
The bottom line
Ballmer took the CEO job at a time when a steep fall in the stock price was basically guaranteed. Mistakes were certainly made, but Microsoft is a far larger and more profitable company today because of Ballmer. There are plenty of successes to go with the failures, and with Microsoft more diversified than ever, the future looks bright.
The article Why Steve Ballmer Is Not a Failure originally appeared on Fool.com and is written by Timothy Green.
Timothy Green owns shares of Microsoft. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft.
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