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Microsoft has generated over $61.7 million in sales to small and medium businesses and educational organizations so far this quarter, not long after it began deploying former retail employees from its shut-down stores to sell to them, according to leaked slides from internal presentations viewed by Business Insider.
Notably, Microsoft in its most recent earnings report identified sales to small and medium businesses as a weak spot amid the pandemic, particularly when it comes to the traditional, one-time purchase model of buying software.
The company announced in June plans to shutter nearly all of its retail locations and transition employees to customer service roles “providing sales, training, and support.” While Microsoft said it wouldn’t lay anyone off, employees had until July 26 to decide whether they could meet certain conditions to transition to the new role, or else resign.
At that time, the employees who stayed on transitioned to “areas of focus,” which a source familiar with the matter identified as selling to small and medium business with fewer than 300 employees, educational sales, training, tech support and online sales. The source asked not to be named discussing private company matters, but their identity is known to Business Insider. Microsoft declined to comment on this report or share more information.
A leaked slide from a presentation shared with employees on Tuesday shows Microsoft projects $73.1 million in quarterly revenue for what it calls SMB/EDU, the combination of sales to small and medium businesses and educational organizations, and had reached $61.7 million as of Sept. 20 across the US and Canada.
The slide suggests revenue in this segment is up 9% from the same quarter last year, but Microsoft declined to confirm the information or provide more context about what exactly “SMB/EDU” revenue includes so it’s unclear how it relates to, or might have changed since, the shutdown of the stores and the ensuing transition.
The figures shared in the presentation give a rare look at a segment of Microsoft’s business that is often overlooked, as Wall Street largely focuses its attention on the ever-increasing growth of cloud businesses like Microsoft Azure, Microsoft Teams and the larger Office 365 suite. Still, it’s hard to gauge the relative success of Microsoft in the SMB segment based on these revenue figures alone, especially against the larger economic picture.
“It’s a hard time to look at revenue,” Creative Strategies analyst Carolina Milanesi said. Larger organizations had an easier time transitioning to remote work than small and medium businesses, which have smaller budgets and are likely in earlier stages of adopting the necessary technologies, she said.
While it’s unclear how exactly the figures referenced here compare to the revenue that was being brought in by the Microsoft stores before the shutdown, Milanesi said Microsoft is likely coming out ahead after the transition because of what it’s saving in real estate and other costs associated with running physical locations. “I can’t believe the stores would have brought in more money,” she said.
The slides also shows financial information for Microsoft’s “sales plays” for selling software and hardware including the Surface Duo, its new dual-screened Android device, and HoloLens 2 mixed reality headset to SMBs and education organizations. A slide from a previous presentation titled, “A new day for Microsoft store,” shows the company launched a new strategy for selling Surface Duo by creating commercial leads and doing live demos on Microsoft.com.
One slide lists $2.1 million in the “current pipeline” and a second-quarter $10 million projected impact for the Surface Duo sales play, and a $4.4 “current pipeline” and projected second-quarter impact for the HoloLens 2 sales play.
Microsoft is also using existing inventory allocated to its now-closed physical stores to drive OEM, or original equipment manufacturer, sales to educational organizations, and disclosed in one slide that it has $98.8 million in the pipeline from its Surface Go 2 strategy to “leverage 5K inbound Pentium units.”
The company is also offering bundling discounts for small and medium businesses to drive sales of Surface and its suite of business applications Microsoft 365.
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