Be sure to check DSO.com reporter Nicole Lewis' new report on recent financial results from Microsoft's Mobile & Embedded Devices (MED) group. Reading between the lines, there's much to learn about the overall DSO market.
As Nicole points out, MED is not really in the DSO business. Instead, it mainly sells operating system software for mobile phones, point-of-sale terminals used by retailers, and in-car automotive systems offered by third parties.
Also, given the enormity of Microsoft, MED is relatively small potatoes. Not counting Microsoft's MapPoint business, which the company is moving to its MSN group, MED revenue for the last 12 months came to roughly $227 million. (MapPoint revenue accounted for another $100 million or so, Microsoft says). While plenty of device software companies would be happy to report that kind of revenue, for the same period Microsoft overall took in revenue of $39.8 billion. In other words, MED represented far less than 1 percent of Microsoft's total revenue. Also, MED is losing money. Last year the operating loss came to $46 million. (To be fair, Microsoft predicts MED will turn a profit sometime in the next 12 months.)
From all this, I derive three lessons for the DSO community. One, for many companies the enterprise vision of DSO is still only a concept. Mundane embedded software is still the reality. Two, turning a profit in this business is harder and slower than it looks. Three, super-fast growth and profits may be incompatible. Microsoft's numbers show that MED's once-rapid growth rate is slowing, even as the losses shrink. That just might be a formula the DSO industry will have to learn to live with.