U.S. vs. Google, Apple in the Crosshairs, Satya Nadella Cries Wolf

Hello everyone. Today’s update is focused on the U.S. vs. Google search antitrust trial taking place in Washington. We begin with a brief summary of the trial. The discussion then turns to Neil’s thoughts on Eddy Cue’s and Satya Nadella’s testimonies.

U.S. vs. Google

Last month, the Justice Department’s civil trial against Google kicked off in Washington. The trial is focused on Google search with a spotlight put on Google’s deal with Apple to be default search on Safari.

The argument being made by the U.S. Justice Department is that these default search deals have helped Google prevent competitors, like Microsoft, from getting search queries and therefore the ability to improve their own search product(s). The agreements with Apple etc. are also said to hurt innovation as Google doesn’t need to do as much to maintain its search position since it can simply pay for continued prioritized access to users. All of this is alleged to result in higher prices for advertisers and less choice for consumers.

Google’s response is that it has the best search product in the marketplace. As it pertains to the Apple deal,

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Microsoft’s Copilot Event, Microsoft (Quietly) Pulling the Surface Plug, Apple Is Thinking Differently

Hello everyone. Last Thursday, we talked about Amazon's product event. Today, we focus on the Microsoft event that took place last week.

Let's jump right in.

Microsoft’s Copilot Event

For Amazon’s product event, the overall theme was a smarter, more conversational Alexa with the company betting on voice as the medium to push generative AI in the home. Last Thursday, Microsoft held its annual fall event for new products in NYC. A video of the presentation is available here.

Out of the two, Microsoft’s event came across as weaker. Some people wondered if Panos Panay’s surprise departure complicated Microsoft's event plans. It's not clear how much advanced notice Panay provided Microsoft. The event did have the vibe of being thrown together at the last moment. Coming in at only 58 minutes, a good portion of which went to demos and CEO Satya Nadella's opening monologue, the presentation was lean. One wonders why Microsoft even bothered to hold an actual in-person event.

Without Panay's energy, the audience seemed to be asleep for much of the presentation.

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Microsoft FY4Q23 Earnings, The Microsoft Business, Apple vs. Microsoft

Hello everyone. We will continue our earnings reviews with the second-largest market cap company: Microsoft. The discussion includes Neil’s thoughts on Microsoft’s FY1Q24 guidance, the big picture regarding Microsoft’s business, and the competitive dynamic found with Microsoft and Apple.

Microsoft FY4Q23 Earnings

When it comes to Microsoft's quarterly earnings releases, there usually aren’t many surprises. Management gives very detailed segment guidance for the current quarter. It’s not common for results to deviate from those numbers. This is one benefit found with having so much enterprise-focused recurring revenue – it’s easier for management teams to forecast out for the remainder of the quarter (i.e. two months). As a result, earnings focus is usually put squarely on management’s new guidance and insights as to how business has been trending during the current quarter.

Along those lines, there weren’t many surprises found with Microsoft’s FY1Q24 guidance, although it’s easy to see why some people may have been spooked. Microsoft (smartly) downplayed revenue contribution from AI in the near-term (i.e. don’t expect much acceleration in cloud revenue growth) while mentioning a larger increase in cost of revenue (i.e. don’t expect much margin improvement) and a need for greater capex in FY24.

It's been easy to talk away slowing or steady revenue growth in the current environment as long as

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