Microsoft Corporation (MSFT)’s Fiscal Year 2015 Second Quarter Earnings Conference Call Transcript

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Also businesses continued to value Windows, we have seen healthy demand for Windows Pro even though we face challenging prior comparable in Q2 as well as in the second half of the year following the Windows XP end of support related PC refresh. Now let’s talk about Windows 10, last week was an important milestone on our path to release Windows 10 and usher in an era of more personal computing.  The heritage of Windows was about enabling one single device the PC, with Windows 10 we are rebuilding a device platform for the mobile first cloud first world. It’s a world where the mobility a person’s experience is paramount, requiring a platform that spans devices from small screens to large-screens to no screens at all. It’s a world where interacting with technology that’s natural as interacting with other people and it’s a world that demands trust and security, it is also world with rich opportunity for developers and window 10 will be the most attractive Windows development platform ever with our free upgrade offer and with universal application and unified store for developers, we will have a large unified up-to-date user-base to target.

We want people to love Windows and have made this almost collaborative project yet, with more than 2 million insiders giving us feedback every day, I’m very optimistic about Windows 10. We are making progress with our own devices for those in the market today and also the one that we’ve recently announced. This quarter we surpassed the 1 billion revenue mark with surface for the first time. The value proposition of being the most productive tablet is resonating, further the sales for Lumia phone’s top 10 million units growing 30% year-over-year this quarter with strength in devices such as the Lumia 500 and 600 series, are affordable smartphones. In this segment of the market the combination of our brand and value standout and we plan to continue to build a beachhead year. We are also creating new device types that open up new markets and opportunities for Microsoft.

In October we launched our first wearable the Microsoft band and just last week we revealed two new hardware with Windows 10, with  Microsoft surface Hub, and Microsoft HoloLens. Microsoft Surface Hub will revolutionize group collaboration and meetings, HoloLens and Windows holographic computing will make mixed reality applications part of everyday life across work and home. I want to talk briefly about Xbox, Xbox One console adoption accelerated this holiday and was the top-selling console in the US and fans on Xbox live were engaged with the service more than ever before, however it’s our strategies coming together with window 10 that give me the greatest optimism. The vibrant social gaming community on Xbox live will span Xbox, Windows PCs, Tablets and phones With window 10, gamers on a PC, Tablet or Xbox console can play together and games on Xbox One can easily stream to a window 10 PC or tablet.

It’s also getting clear how games people love today will evolve to mind blowing experiences in the future when designed for mixed reality that window 10 and HoloLens create. Just imagine what’s possible with Minecraft, gaming truly is a valuable part of millions of people’s lives and Microsoft will excel and increase our lead. Before closing  I want to share few thoughts on capital allocation. Over the past several quarters and certainly with last week’s Windows 10 announcement, you’ve seen us unleash new innovation in our cloud services with Windows and our hardware. We did all of this without materially growing our cost-base, this required clarity in purpose and value proposition realignment of talent and disciplined execution. Our increasing innovation and competitiveness in today’s growth markets and the creation of new categories is how we would most positively impact the returns for our investors. Earlier today we announced our intention to complete the existing $40 billion share repurchase authorization by December 31, 2016.  This is another step in our ongoing commitment to increase capital return for our shareholders while investing in the growth of our business. It too shows our optimism for the future growth of Microsoft. As we move forward, we will certainly continue to be thoughtful in our capital return decisions, balance across dividends and share repurchase.

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