Windows Enterprise Desktop

Jul 23 2014   3:53PM GMT

Can Satya Nadella bring Microsoft back from the Dark Side?

Diana Hwang Diana Hwang Profile: Diana Hwang

By Diana Hwang

Yoda-400x276Satya Nadella reminds me of Yoda.

That’s saying a lot since Microsoft has always had been likened to the Evil Empire and whomever was at the helm was Darth Vader.

No, Nadella is not short, green and wrinkled with big ears (far from it), but he is the intelligent yet humble public and behind-the-scenes persona that gets Microsofties to focus on the company’s big picture strategy just as Yoda guided Luke and the rebels throughout the Star Wars series. (Just for the record, I’m a fan of the old Star Wars – Episodes IV, V, and VI).

Nadella has led the $86.8 billion company for six months now, and he’s focused on a few key messages: mobility, cloud, productivity, and melding digital life and work experiences.

What does it all mean? Everything Microsoft does is about helping people be more productive and getting things done.

But here’s an interesting tidbit that came up during Microsoft’s fourth quarter and fiscal year 2014 earnings call this week: Nadella confirmed Microsoft will consolidate multiple Windows operating system into one version.

“We will streamline the next version of Windows from three operating systems into one, single converged operating system for screens of all sizes,” Nadella said during the call.

It’s about time. There is absolutely no need to have separate OSes for PCs, tablets and smartphones. Why? Because technology like CPUs and screens have improved so much that devices are much more mobile friendly. They can handle the full Windows workloads while offering   workers a full day of battery life

As a result, the streamlined Windows OS built on a single core could generate other beneficial results like developers being more motivated to create more relevant business apps for the Windows Store.

The converged Windows also furthers along Microsoft’s universal apps vision. Developers won’t need to spend more time building separate Windows PCs, tablets and Windows Phone apps. This is especially important as Windows Phone and Windows tablets have a miniscule market share compared to Apple iOS and Google Android devices.

If developers can create one Windows app that works across a PC, tablet or smartphone and simply optimize it for the screen, it becomes a decent value proposition. It’s the next step for continuing this vision of the universal app Microsoft unveiled at Build 2014 this past spring. Developers can now view the world of Windows devices not in a segmented fashion but as a whole.

“We will unify our stores, commerce and developer platforms to drive more coherent user experiences and a broader developer opportunity,” Nadella said on the financial call. He promised the next wave of Windows enhancements in the coming months.

With Microsoft simplifying its engineering teams and refining its vision, the industry will closely watch how well it can execute its strategy.

The numbers don’t lie

No matter how promising the strategy, it all comes down to the bottom line.

For the fourth quarter 2014, Microsoft posted revenue of $23.38 billion and net income of $4.6 billion. For its fiscal year 2014 ended June 30,  Microsoft  posted revenue of $86. 8 billion and net income of $22 billion.

Microsoft attributed much of its growth to cloud services such as Office 365 and Azure. The commercial cloud annual revenue run rate doubled and hit $4.4 billion. Microsoft said it added over 1 million subscribers to Office 365, bringing the number to 5.6 million users.

But Microsoft also took a $700 million operating expense hit from the acquisition of Nokia. Just last week, Microsoft laid off 18,000 workers, of which 70% of those impacted occurred in the Nokia Devices and Services division.

The company created a new phone hardware  segment  to account for revenue from its smartphone business. It contributed $1.99 billion in revenue this quarter to Microsoft’s bottom line, driven by sales of its Lumia 500 and 600 series smartphones.

Microsoft will continue to compete with its OEMs to create new devices like Surface and as Nadella says, the company will “responsibly make the market for Windows Phone.”

“However, we’re not in hardware for hardware’s sake, and the first-party device portfolio will be aligned to our strategic direction as a productivity and platform company,” Nadella said.

It remains to be seen how successful Microsoft will be. Just like Star Wars Episode VII is expected to be released in 2015 with the old cast of characters returning but with some new twists. Microsoft too is coming back to its original successful productivity roots but with some new twists as well.

May the Force be with you.

6  Comments on this Post

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  • Gbollard
    Satya's technical direction is far superior to Steve Ballmer's and I have no doubt that he's selecting a better path though whether he can deliver remains to be seen (I suspect not).

    The big problem now is that he's just turned 18,000 people (and their families) against Microsoft with those layoffs.  Those people could make a lot of noise if they wanted to.
    100 pointsBadges:
  • Jwnoord
    I'd buy this if it happened 10 years ago.

    The market they are seeking hasn't existed for a long time now (in computer years).  Unless they can dump, and I mean REALLY DUMP the baggage that is Windows and embrace a modern streamlined user driven, quick, and CHEAP operating system, this is way too late to be a factor.

    This "new" strategy is all well and fine for business enterprises and individuals stuck fast in the 1990's mentality, but frankly market shift is now SOHO and Home / Mobile users of all types.  Old paradigm of cash cow Windows and Office no longer apply.  I hope they succeed, lots of jobs in Redmond depend in that.  But  they succeed for the people's sake, not the company.  By using the "Boomer poster child" Balmer, they (Microsoft) doomed themselves to second banana to everything and everyone else for the past decade. 

    They (Microsoft) do have a lot of money and that will keep them going regardless.  But as a market leader (barring buying the rest of the industry, not so much.  ship sailed long ago.
    50 pointsBadges:
  • Michael Tidmarsh
    Like Gbollard said, I think Satya's first priority is to remove the negatives from Steve Ballmer's tenure and that starts with the Nokia acquisition. And now with the one single operating system, the future is bright for Microsoft.
    65,700 pointsBadges:
  • Diana Hwang

    @Jwnoord Thanks for your comments. This is not an overnight fix and it will be a matter of execution. This could take years but Microsoft has a boatload of money to invest where it makes sense.

    There is definitely a shift towards the SOHO and SMB market for mobile. I think Microsoft learned a few lessons from Windows 8 and forgot its core audience. They got sidetracked with trying to be a fast track innovator to go after the next Shiny New Thing.

    Now Satya has to fix the broken pieces and bring Microsoft back to its roots while capturing new markets in a way that makes sense for the company. It'll be interesting to see how well the company does over the next few years and whether Microsoft's message hits home not only for SOHO and SMB but also for the enterprise.

    1,720 pointsBadges:
  • markyartin
    Work hard and stay humble 
    0 pointsBadges:
  • Diana Hwang
    @markyartin So true. 
    1,720 pointsBadges:

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