Yesterday evening, Microsoft released the numbers for its fiscal Q1 2014, and the numbers were quite good, beating analyst expectations enough to send the company’s shares to $35.75 as we write today. That is a 6 year high for Microsoft's share price and perhaps it is the beginning of a new trajectory for the company.

That said, what continues to still keep Microsoft moving forward - and yet again, why Steve Ballmer, despite his failings over the last three years in looking ahead to tomorrow, remains a superstar CEO - is enterprise software. The collective market segments that fall within this group continue to deliver enormous dollars into Microsoft's coffers, and they do so even as Windows revenue continues to lose ground. On the other hand, the recently re-orged and redefined – and more directly "consumer-focused" – devices and services businesses continue to lag, though there has been a tiny bit of improvement.

Enterprise software - regardless of how old school it may seem, remains fertile ground for Microsoft, and this time around it was enough to also boost its share price. Revenue here is what makes Microsoft a value investor's dream company while at the same time causes broad yawns for the growth investor. Perhaps the very late-in-the-game mobile and device steps Microsoft has taken are finally starting to gain some investor mindshare of the sort that gives the growth investor some hope.

Microsoft noted that for Q1 2014 (which ended on September 30, 2013):

• Revenue was $18.53 billion - a 16 percent increase year over year;
• Gross margin was $13.42 billion;
• Operating income was $6.33 billion;
• Net income reached $5.24 billion;
• Earnings per share for the quarter were $0.62 per share, well ahead of consensus analyst estimates of $0.54 per share.

With numbers all substantially above consensus analyst estimates, inevitably the stock took a positive turn, although this time around it took a far more significant positive turn than the tiny incremental bumps the stock is typically used to seeing. It will be interesting to see how the stock fares next week after the glow from the report dies off.

Microsoft further noted that its corporate software and services business delivered a huge 10 percent revenue boost to $11.2 billion. The devices and consumer revenue side grew "only" 4 percent to $7.46 billion - but the fact that it did grow is important to underscore. It is also worth noting that even with what some analysts refer to as sluggish growth, the consumer and mobile business is still a $7.46 billion business that will only continue to grow.

Here are some commercial revenue highlights:

• SQL Server revenue grew substantially, with SQL Server Premium revenue growing more than 30 percent;
• The key productivity server offerings - Lync, SharePoint, and Exchange - collectively grew double-digits;
• And cloud technology is now beginning to rev up, with commercial cloud revenue growing 103 percent.

Devices and consumer revenue highlights include the following:

• Surface tablet revenue grew to $400 million with sequential growth in revenue and units sold over the prior quarter;
• Search advertising revenue grew 47 percent, driven by an increase in revenue per search and volume.

Sadly or inevitably, Windows OEM revenue declined 7 percent. Windows Pro revenue grew for the second consecutive quarter, but the die is pretty much cast here.

Ballmer noted that, “Our devices and services transformation is progressing and we are launching a wide range of compelling products and experiences this fall for both business and consumers. Our new commercial services will help us continue to outgrow the enterprise market."

That is superstar CEO Ballmer speaking.

Kevin Turner, chief operating officer at Microsoft, further elaborated on the enterprise business: “We continue to execute well across our businesses and we are seeing robust demand for our enterprise products and cloud services. Strong customer adoption of Office 365, Azure, and Dynamics CRM Online is accelerating our business transition to the cloud. Our investments in SQL database platform, Hyper-V, System Center, and Lync are driving market share gains as these comprehensive solutions enable customers to increase their insight and efficiency.”

Meanwhile, the "other" less stellar CEO Ballmer also represents bravely soldiered on in, also noting that, "We are seeing lots of consumer excitement for Xbox One, Surface 2 and Surface Pro 2, and the full spectrum of Windows 8.1 and Windows Phone devices.” There is no doubt that the enthusiasm is genuine, but the inability of Ballmer to execute here is the reason Microsoft will soon have a new CEO.

It may be hard to believe, but today Microsoft has over 100,000 employees, and has so many massive yet constantly moving and evolving parts that it can't simply bring in a "visionary" CEO for today's mobile world - it needs to also bridge the gap to where all the real money still continues to come from. It is a significant challenge.

Microsoft enacted a change in its earnings report structure, more clearly delineating the revenue streams between its enterprise and consumer businesses. This certainly boosts the importance of the enterprise business and underscores its "vast solidity." And clearly, this end of the business, as Turner's comment above highlights, is growing robustly.

It also highlights, of course, that the consumer, device and services side of the business lags. Over time, and with a new CEO in hand (assuming of course the board's choice for a CEO proves to be a good one), this side of the business will improve dramatically, and, coupled with ongoing growth in the enterprise, should give investors a lot to consider. Both value and growth investors are going to discover a lot to like over the next several years.

…If the right CEO takes the helm


Edited by Blaise McNamee