Microsoft should open up and report its cloud revenue, former CEO Steve Ballmer said at the company’s annual meeting in Bellevue, Washington, reports Bloomberg’s Dina Bass.
“It’s sort of a key metric — if they talk about it as key to the company, they should report it,” Ballmer said.
Microsoft does talk about its cloud progress but it sort of cherry picks the numbers, giving out different user/usage information, revenue or margin information on some of its cloud services and not on others.
In terms of its biggest, most important cloud services, those it sells to businesses which it calls its “commercial” cloud, it only discusses that in terms of “run rate.” That’s the amount of revenue under contract calculated on an annual basis.
Companies tend to sign multi-year cloud contracts but revenue can’t be recognized until it’s billed, so “run-rate” has become a way for a company to show investors that cloud sales are growing even if the actual revenue collected to date is low.
Ballmer, the company’s largest individual investor, doesn’t think disclosing run rate is good enough.
“They should report the revenue, not the run rate,” Ballmer said. Since leaving the CEO job and Microsoft’s board about two years ago, he told Bloomberg he had no guess as to what the company’s total, actual cloud revenues are.
And he would prefer if Microsoft disclosed the profit margin on its cloud, too, because while gross margins for Microsoft’s software is high, it can be lower for cloud services. He wants to see if the cloud is as profitable as software.
There’s good reason for him to push Microsoft like this.
As Business Insider previously reported, Microsoft sales people can convince customers to add cloud services to their big, sweeping enterprise software contracts, even if those customers have no intention of using the cloud.
This allows Microsoft to report cloud growth even when those customers generate little to no actual billed revenue.
Sources have told Business Insider that Nadella has since been pushing sales people not to tack cloud services onto enterprise contracts but to focus on “consumption,” i.e. getting customers to use Microsoft’s cloud.
We understand that this push is working well and consumption is rising. But, as Ballmer points out, Microsoft has yet to report actual commercial cloud revenue numbers.
Microsoft’s investor relations spokesperson Chris Suh tells us the company is listening to Ballmer, saying. “We enjoy a regular dialogue with Steve, and welcome his input and feedback, as we do from our other investors.”
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