I have to say that I’ve been finding Microsoft a lot more interesting company to watch over the past couple of years than I ever had during the previous 20 or so, now that the former 900 pound gorilla of the PC sector is being obliged to deal with the ramifications of a post-PC world ushered in with Apple’s release of the iPad in 2010.
Prior to the iPad Microsoft’s overwhelming dominance of the personal computer operating system market made the company, despite its claims of being an innovator, both predictable and boring, and its flagship product arguably likewise — at least for Mac OS aficionados like me. I sort of kept an eye on what Microsoft was up to, but didn’t pay much serious attention unless there was an issue that somehow impacted the Mac orbit. I haven’t been a Microsoft Word user since version 5.1, the last piece of Microsoft software I purchased back in 1993. I did use Internet Explorer for Mac some when it was the default Mac OS browser for an interval after the famous deal Steve Jobs negotiated with Bill Gates in 1997 and MSN Messenger for a while in the late ’00s, but they were both free. Mostly predictable and boring as well.
Microsoft still enjoys a commanding 91.19 Percent share of the desktop OS Market (August), but that status is a lot less significant than it used to be, especially with just over a third of PC users still running ancient four versions out of date Windows XP, only 7.1 percent using the current Windows 8, and PC sales having been shrinking for some time now, while the mobile computing device OS sector is dominated by Apple’s iOS and Google’s Android, with the various Windows mobile OS permutations relegated to a niche sixth place and minuscule .97 percent of that market a share percentage far worse than Apple’s retained of of the desktop OS market at the nadir of its beleaguered period of the late ’90s and early ’00s.
The upshot is that the iPad and the revolutionary industry-wide paradigm-shift it initiated finally jolted Microsoft out of its smug complacency, and shoved it toward thinking outside its comfort zone and actually trying to innovate, rather than merely playing copycat as it had with, for example, the Mac OS inspired Windows user interface and its halfhearted Zune response to Apple’s iPod.
This process of course has not been wildly successful, as epitomized by the lukewarm market takeup of Windows 8 and especially the failure of Microsoft’s answer to the iPad — the Surface tablet PC in its two versions to capture the imagination or the purchase spending of customers. However, in my estimation, Windows 8 and the Surfaces are the most interesting and innovative personal computing products to emerge from Microsoft since Word in its 3, 4, and. 5 versions over two decades ago.
Contrarian that I am, I like Windows 8 better than any other Windows version I’ve sampled, and being primarily production-oriented, the Surface, particularly the Pro version that can run the full desktop version of Windows, has intrigued me from the outset, addressing as it does my main complaints about the iPad’s limitations as a production platform.
The problem, however, at least from Microsoft’s perspective, is that intrigued though I may be, I’m still working with Macs and an iPad. In the latter context, where the Surface has failed to rope me in as an iPad alternative is largely its MacBook Air/Ultrabook ballpark price and its mediocre battery life. With the iPad I can get the exact same computing performance in a $500 16 GB entry-level model as I would in the top-of-the-line 128 GB iPad “Pro” model that sells for nearly twice as much, while Microsoft’s price leader Surface RT models (recently being offered at a discounted $350) , use a dumbed-down version of Windows with a paucity of application support.
There is still some hope that substitution of Intel Haswell processors for the Surface Pro’s current Ivy Bridge Core i5 CPU silicon in the Surface Pro 2 will result in significantly improved battery life, but there’s still the price issue. We should know soon wether there will be any Surface Pro price adjustments going forward, Microsoft having scheduled a special event in New York on September 23 to launch the Surface 2 tablet lines.
That seems odd timing what with Microsoft’s blockbuster acquisition of substantially all of former leading cellphone maker Nokia’s Devices & Services business, license of Nokia’s patents, and license and use Nokia’s mapping services, the transaction expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.
Subject to the closing of the transaction, Microsoft will acquire substantially all of Nokia’s Devices & Services business, including the Mobile Phones and Smart Devices business units as well as an industry-leading design team, operations including all Nokia Devices & Services production facilities, Devices & Services-related sales and marketing activities, and related support functions. At closing, approximately 32,000 Nokia employees are expected to transfer to Microsoft, including approximately 4,700 people in Finland, although Nokia’s CTO (Chief Technology Office) organization and patent portfolio will remain within the Nokia Group. The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50%, of Nokia’s net sales for the full year 2012.
The jury will have to stay out for a while regarding whether this bold gambit will be remembered as outgoing company CEO Steve Ballmer departing with a redeeming flourish after several poorly-received product launches, or the last element in the an underperforming string under his watch.
With the Surface, Windows 8, and soon presumably Nokia based Microsoft smartphone hardware, it appears that Microsoft has finally appreciated the benefits and advantages of Apple-style software/hardware vertical integration, and it’s way too soon to pass judgment on how that will work out for the company.
Building on the partnership with Nokia announced in February 2011 and the increasing success of Nokia’s Lumia smartphones, cited by Steve Ballmer and Stephen Elop in a joint letter to customers and stakeholders, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.
Microsoft is acquiring Nokia’s Smart Devices business unit, including the Lumia brand and products. Lumia handsets have won numerous awards and have grown in sales in each of the last three quarters, with sales reaching 7.4 million units in the second quarter of 2013. Microsoft is also acquiring Nokia’s Mobile Phones business unit, which serves hundreds of millions of customers worldwide, and had sales of 53.7 million units in the second quarter of 2013. Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products. Microsoft is also acquiring Nokia’s Mobile Phones business unit, which serves hundreds of millions of customers worldwide, and had sales of 53.7 million units in the second quarter of 2013. Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products.
“Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” says Ballmer in a Microsoft release. “In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”
“Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing,” says Stephen Elop, who following last week’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services. “With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”
My provisional take is that this could turn out to be a successful strategy, provided that Microsoft can figure out how to polish the user experience and follow through, while keeping prices competitive. Microsoft and Nokia claim that Nokia Windows Phones are the fastest-growing smartphones in the world, and it seems inevitable that Windows Phone will become at least the number three smartphone OS, with Microsoft itself increasingly driving share gains, although OEM support for Windows Phone is likely to be less enthusiastic now that the OS supplier is on track to become a full-fledged hardware maker competitor on the platform.
Another imponderable as yet is who is going to replace Steve Ballmer as Microsoft CEO. Nokia CEO Stephen Elop, who is expected to transfer to Microsoft at the anticipated closing of the transaction. over to Microsoft as part of the acquisition deal along with a brains trust of Nokia executives including Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber is being shortlisted. Another name that’s being speculated is Alan Mullally, the former Boeing executive recruited by the Ford Motor Company to turn that enterprise around, and whose success in doing so, for example navigating Ford through the Late ’00s recession without declaring bankruptcy, is impressive. That would of course depend somewhat on whether Mr. Mullally would be interested in another new challenge, or is content to stay at Ford.
Like I said, Microsoft has become a lot more interesting company to watch, and it will be particularly so monitoring how these new developments play out over the next few years. Can Microsoft make the Surface concept live up to its promise, especially in the enterprise sector, and perhaps also with a consumer oriented smaller 7-8-inch version? Can Nokia-based Microsoft Windows Phone smartphones mount a credible challenge to Apple iOS and Google Android dominance of the sector? Will touchscreen Ultrabooks and desktops be key to realizing Microsoft’s touch-oriented vision for Windows 8 and beyond? Logical deduction suggests that success in all these aspects is potentially possible, but much will depend on whether Microsoft can learn to sweat the details the way Apple does. If they can, I wouldn’t categorically rule out buying Microsoft products myself in the future.