Microsoft's earning report yesterday made one thing perfectly clear: From now on, it's all Office, all the time. And that's a good thing.
The company's revenue was $20.4 billion, just barely under the $20.49 billion a year ago. Its net income was $5.7 billion, $0.68 per share, down from $6.1 billion, $0.72 per share one year ago. The figures for the quarter were generally in keeping with forecasts, with earnings per share up slightly over what analysts had forecast.
Those earnings may sound ho-hum, but consider that they were achieved while PC sales around the world have been tanking. A recent report from IDC says that worldwide PC shipments fell 9.8% in 2013, the "most severe contraction on record," in IDC's words.
The brightest spots in the earnings report were the company's Azure cloud-computing business, which grew 150%, and the subscription-based Office 365, whose revenue more than doubled. By quarter's end, Office 365 had 4.4 million subscribers, nearly 1 million more than in the previous quarter.
Office 365's numbers, as impressive as they were, understated its real importance to Microsoft. In a conference call with Wall Street analysts, CEO Satya Nadella said Office 365 is:
"...the core engine that's driving a lot of our cloud adoption."
In other words, it's doing for Microsoft what Windows once did: Not just drive direct revenue, but drive a great deal of indirect revenue as well, in this instance towards the cloud. And as IDC analyst Al Hilwa told the Seattle Times, "Cloud is clearly their No. 1 maniacal focus right now."
Given all that, it's no surprise that Microsoft finally released Office for the iPad, even before the Windows 8 touch version is ready. And it's no surprise that it's now working on an Android tablet version, or that it's just released a new, less-expensive version of Office 365 for people who only need licenses for two devices, not five.
Expect a lot more innovation around Office -- better online versions, better collaboration, better mobile versions, and more. Expect faster revisions, because that will give people a reason to subscribe to it rather than pay for perpetual licenses. And expect plenty of links between Office and other Microsoft services.
All this means that from now on, Microsoft isn't a Windows-first company. It's an Office-first one.