Cloud Milestone: Microsoft's Office 365 Beats Out Traditional Office
Six years later, new Office has dethroned the old Office. Revenue from business sales of the Office 365 productivity suite topped traditional corporate Office sales for the first time last quarter, Microsoft said, a milestone in the Redmond company's transition from selling packaged software to cloud-computing products.
Microsoft first started selling its iconic collection of Word, PowerPoint, Outlook and other workplace software through online subscriptions under the Office 365 name in 2011.
At the time, Google's Docs and other productivity software were making inroads in a realm then dominated by Microsoft, threatening what had been the company's most profitable line of business.
Microsoft Chief Financial Officer Amy Hood said in a quarterly earnings call Thursday that during the three months ended in June, sales of Office 365 to businesses surpassed sales of the traditional packaged version that entitled the user to the software in perpetuity.
The company didn't break out the scale of each, but sales of Office products of all sorts to businesses totaled $5.8 billion during the final quarter of Microsoft's fiscal year.
Office 365, analysts say, makes up most of Microsoft's "commercial cloud," the line of business-focused subscription products the company has staked its future on. Sales of that group of products stood at $4.75 billion in the most recent quarter, helping to propel Microsoft shares to a record high as investors bet the company is positioned to thrive in the emerging world of web-delivered software.
Consumers, on the other hand, still spend more on Office licenses than the subscription edition. Those lines of businesses notched about $850 million in sales during the last quarter.
Office 365 commercial sales grew 43 percent during the quarter from the previous year. Traditional Office license sales fell 17 percent, a decline Microsoft attributes to companies opting to buy into the cloud version instead.
Microsoft has said that it expects to make more revenue per Office customer with the online model.
Office 365 business subscriptions sell for $100 to $420 a year depending on the package, compared with $70 to $100 for the consumer products. Those figures can vary in sales to large businesses, or in packages that include Windows or other Microsoft software.
For those interested in a perpetual license, Office Home 2016 costs $150, and Office Professional 2016 sells for $400.
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