CEO Satya Nadella made a strong impression on analysts when he made his appearance in front of analysts for the first time. Shares of Microsoft Corporation (MSFT) are up around 8% since Nadella became CEO. So far analysts and investors have welcomed his vision and strategies to transform Microsoft. With the goal of diversifying Microsoft’s offerings from the traditional PC based Windows business to directing more focus on mobile and cloud based computing, he is positioning the company to be in pace with competitors such as Apple (AAPL) or Google (GOOG), (GOOGL). Nadella made it clear that it’s important to see the company with a fresh view to know the realities and future opportunities.

This new mobile-first and cloud-first direction is exactly the mindset that Microsoft needs to innovate for the future, as I stated in my previous MSFTSeeking Alpha article on February 11th shortly after Nadella took office. My position since then has not changed. Since that buy recommendation the stock is currently up 11.06% in accordance with the algorithm. As a focus on cloud is a priority for Microsoft, this article will examine how this shift has taken place so far.

In FY14 Q3, Devices and Consumer revenue grew 12% and Commercial revenue grew 7%. Bing U.S. search share grew to 18.6% and search-advertising revenue grew 38%. Microsoft sold 2 million Xbox units, including 1.2 million Xbox One units. The company announced revenue of $20.40 billion for the quarter ending March 31st. Chart 1 displays Microsoft’srevenue from the first quarter of 2008 until the third quarter of 2014.

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Profit for the company came in at $5.66 billion, or 68 cents per share, outperforming Wall Street’s average of 63 cents per share. In line with the average analysts’ estimates, sales fell 0.4% to $20.4 billion. While demand for tablets and smartphones are increasing, PC sales fell 4.4% in FY14 Q3, which is the eighth consecutive quarter of declines. The recent changes in Microsoft’s attitude, which are some of the biggest in the company’s history, are going to add new vigor to the stock. Soon after Nadella was announced as CEO, he made it clear “Going forward, it’s a mobile-first, cloud-first world.” The division that houses the cloud business is growing and for the first time, it almost accounted for 10% of overall revenues.

A Mobile First & Cloud-First World

During the third quarter, the cloud helped drive significant growth in revenue including both Office 365 and Microsoft Azure. Nadella stated, “This quarter’s results demonstrate the strength of our business, as well as the opportunities we see in a mobile-first, cloud-first world.” In fact, total Commercial Cloud revenue more than doubled again this year. Office 365revenue grew over 100%, and commercial seats nearly doubled, demonstrating strong enterprise momentum for Microsoft’s cloud productivity solutions. The subscription added 1 million new members for a total of 4.4 million subscribers. These numbers do not include new subscriptions from the addition of Office on the iPad. Not only has Office 365 shown impressive growth but revenue from its web services division, Microsoft Azure increased 150%. The company also announced 40 new features that make the platform more attractive to developers.

Microsoft Office In The Apple App Store

Microsoft has taken a warmer approach with Apple and officially introduced Office for the iPad at the end of March. A move that even Apple CEO Tim Cook “wholeheartedly” welcomed and recognized “Microsoft’s Office is critical software for the iPad, especially in enterprises, and customers are responding well.” He even insisted that Microsoft should have brought the Office suite to iPad sooner. Within nine days, the application wasdownloaded 12 million times and even quickly leaped to the top of the free iPad apps chart in mere hours, with Word, Excel, and PowerPoint positioned at the first, second, and third spots, respectively. While there are some complaints in the iTunes Review section, Macworld recently reviewed the applications giving both Excel and Word 4 out of 5 star ratings and PowerPoint received the lowest rank of 3.5 out of 5.

The iPhone version of Office is free and the initial download on iPad is free as well. However, as investors would be livid if Microsoft endangered its value, the iPad version is not actually free. Customers really need an Office 360 subscription to use the application as it is intended.

Putting Office on the iPad expands the value of the program and coincides with the company’s goal of adjusting to the mobile-first, cloud-first world. The launch of Office on the iPad is also a clear indication of the differences between Nadella and Microsoft’s previous CEO Steve Ballmer. It was rumored that Ballmer postponed the release of Office on the iPad, ready to be released in 2012, in order to avoid undermining the Surface RT and Pro tablets. Microsoft under preceding leaderships’ focused on getting Windows on every PC and device, while the new objective is getting Microsoft on every device. Under Nadella’s leadership, Microsoft will ensure its software products and cloud services will be available on the mobile devices that its customers are using.

Why Not Android?

There is also the question of why didn’t Microsoft also introduce Office to Android, a platform which could certainly benefit from the sophisticated, touch oriented, tablet-optimized productivity software. Worldwide tablet sales in 2013 grew 68%, with Android capturing 62% of the market however, the iPad dominates with overwhelming market share in the enterprise, government and education markets. A majority of the Apple devices running the iOS platform are up to date so most devices are capable of supporting the latest features. There is the problem of Android’s software fragmentation, making it much more difficult on this platform.

Conclusion

The company has done very well so far this year and was the one of two companies that the I Know First algorithm considered to be the best dividend stocks for growth in 2014, up 11.39% since the forecast date (December 15th 2013). Based on the most recent predictions, we do not expect MSFT to have a much higher return. The decision to promote Satya Nadella as the Chief Executive Officer was the best decision for Microsoft. Nadella approached the position with a plan and a new direction envisioned for the company. Looking forward it will be interesting to see how Microsoft continues to make this adjustment, as this was only the first quarter that Satya Nadella has been at the helm.