Financial results from Microsoft Corp and Intel Corp this week brought into sharp relief the challenges the onetime PC partners face as they shift more of their emphasis to cloud computing. Microsoft has seen strong long-term growth in parts of its cloud business, a combination of services and software catering to corporations moving computing functions to remote data centers run by outside providers.
While revenue for its flagship cloud services business Azure more than doubled last quarter, the company said in Thursday's earning report, the "intelligent cloud" division that includes it saw just 3 percent revenue growth in the period. And operating profits for the division dropped by 14 percent, in part reflecting non-cloud products included under its umbrella, such as traditional server software.
Chipmaker Intel has a less clear path to growth for its cloud operations, and investors have remained skeptical. The company's share price is down about 1 percent over the last year, as software maker Microsoft's stock rose about 30 percent. Microsoft's market capitalization of around $440 billion is almost three times Intel's at $151 billion, compared to about double five years ago. "Wintel" computers running Windows on Intel chips dominated the personal-computing era, which is slowly ending as more people turn to mobile phones for computing needs and corporations deemphasize desktops. Both Intel and Microsoft, run by relatively new CEOs Brian Krzanich and Satya Nadella, are betting their businesses on the cloud. That segment includes the chips powering cloud data centers, where the company says it is doing well. Average prices of data center chips fell 3 percent in the last quarter, although Intel said that reflected the fact that cheaper chips were gaining ground the fastest.