Windows no longer Microsoft’s main focus

Published: Tue 13 Mar 2018 04:48 PM
Since taking over as Microsoft CEO, Satya Nadella has remade the company. What was a PC giant is now a cloud and enterprise computing giant. And that has implications for Windows.
Microsoft's latest financials underline the change. In the three months to December 2017 the company's revenue was almost US$29 billion. Of that, what Microsoft calls Productivity and Business Processes was almost US$9 billion. Intelligent cloud made up almost US$8 billion.
The remainder, a little over US$12 billion, fell under the label of More personal computing. This unit includes Surface hardware, advertising and everything Xbox.
Given the gaming business brought in around US$4 billion, that means in round numbers, Windows accounts for only a quarter of today's Microsoft.
That proportion is falling fast.
Windows stagnant as cloud, enterprise booms
Microsoft's More personal computing business grew around one percent between the end of 2016 and the end of 2017. Intelligent cloud was up almost 15 percent. Productivity and Business Processes climbed 25 percent.
Draw a straight-line projection and Windows will be under 20 percent of Microsoft's revenue by the end of this year. Within two to three years it will be less than 10 percent.
Microsoft's accounting is hard to break down, but looks as if the operating system business is fading into the background.
Some parts of Windows have done more than fade. During the year Microsoft dropped Windows Phone. Then company admitted it failed to keep pace with iOS and Android.
You can't dismiss the phone OS as a meaningless sideshow. Former CEO Steve Balmer spent close to US$10 billion on it. This figure includes the US$7.6 billion write-down of the Nokia acquisition.
Poor performance
It would be fair to say Microsoft's Windows strategy hasn't been right since Windows 7. Some less kind souls say it hasn't been right since XP. That's extreme, yet Windows 8 was clearly a flop.
Windows 10 stopped the immediate rot, but did nothing to recover Microsoft's reputation with uncommitted users. It's no accident that PC sales have stayed in free fall since 10 appeared. Nor is it an accident that Apple sales have climbed in that time. Likewise Chromebook sales rocketed.
Those users who can are bailing out.
Something else is going on. Writing at ZDNet Ed Bott says: "Microsoft's steady retreat from consumer products is nearly complete." Bott's story looks at how Microsoft has shifted its focus from the consumer towards business.
What's next to go?
Bott doesn't say so, but you could read between the lines when looking at the financial numbers and conclude that Windows could be next. He writes about Microsoft: "...shifting resources to business units that are thriving: enterprise software and cloud services".
Go back to the financials mentioned earlier: those thriving business units do not include Windows.
People who are heavily invested in Microsoft and its OS may argue otherwise, but if you use another operating system and make occasional visit back, there's a feeling things are running down. Not a lot, but there is a sense Windows is past its prime.
There's also a sense Microsoft no longer has a clear vision for its operating system. Or maybe any vision.
A year ago Microsoft introduced Windows 10 S. The company said it was a new edition. On paper it sounded good. 10 S boots faster, is more secure, offers better battery life and is more robust in the sense that its harder to corrupt files.
These positives are down to the fact that Windows 10 S is a cut-down, limited version of Windows 10.
10 S was a mess
Windows 10 S turned out to be a mess. Nobody outside Microsoft seemed to like it. Reviewers panned it. Consumers hated it. It is another shot-in-the-foot disaster on the scale of Windows 8.
At the time of the launch the idea was that users could pay US$50 to switch to Windows 10 Pro. Microsoft would pack 10 S with a new computer. Customers buying a new PC would then be hit up for an extra charge later to unlock all the features of the computer they purchased. Almost everyone would want to upgrade. At Redmond it looked like free money.
Let's hope no-one at Microsoft wonders why Chromebook and MacBooks are selling so well.
Last week Microsoft backtracks on that madness. It said users can now upgrade to Windows 10 at no extra charge.
The10 S debacle tells us Microsoft no longer employs its best thinkers on its operating system software. It suggests Microsoft doesn't really care about the product any longer. After all, it doesn't make much money.
Microsoft has a huge cash cow. The software is still installed on most of the world's traditional computers — although not the pocket computers people now use most often. There are ways it can and will continue to squeeze money out of its huge installed base.
Ring out the old, ring in the new
And yet you can't help getting the impression Microsoft's top brass are no longer interested. That's the old world; a declining empire. Meanwhile there are exciting new opportunities to chase in the cloud and enterprise spaces.
One possible way out would be for Microsoft to hive off Windows into a seperate business and sell or otherwise demerge the operation. This worked for IBM's PC business, although not for IBM. A similar approach also worked up to a point for HP.
More likely Microsoft will continue to manage down its Windows operation. Sooner or later even the most die-hard fans will realise they are neglected. Apple and Chromebooks loom. There's an opportunity for Android or for a revival of desktop Linux.
We'll soon be in a post-Windows world. It's just that two-third of computer users don't realise that yet.
Windows no longer Microsoft’s main focus was first posted at
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Bill Bennett publishes technology news and features that are directly relevant to New Zealand readers.
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