Where is Microsoft going?

Microsoft just selected a new CEO to replace Steve Ballmer who was employee 30.  The new CEO is Satya Nadella, a 22 year veteran of Microsoft and head of cloud services.  Since the old guard is moving into the background, both Bill Gates and Steve Ballmer will remain on Microsoft’s board of directors, this is a good time to examine what Microsoft’s options are going forward and where they’re likely to go.

(1) I predict a grand divergence of the Windows and Windows Phone operating systems.  A handheld device has too many constraints (less memory, slower processor) and too many differences (sensors for location, device orientation, motion, position, temperature, even illumination) for there to be a good technical refactoring into one code base.  iOS and Mac OS X have remained different despite each influencing the other.  On the whole this has been a GOOD thing.

(2) Both mobile and desktop devices connect to the network to pull and post information to servers.  The need  to connect to the cloud for data is perhaps more acute on mobile devices, but who can do their job at a desk without the Internet?  Despite twin code bases for mobile and desktop, I predict Microsoft will integrate Azure cloud services on mobile and desktop OS platforms.  The need is there for both.  You register your Android devices by logging into your Gmail account, why not register your Windows device — phone or laptop — by logging into an Azure account?

(3) Samsung and Google have been feuding in the press over how much customization Samsung can do to Android.  Samsung has definitely pushed the Android envelope coming out with more devices and more form factors faster than any other manufacturer.  Google has let them make changes here and there, but is trying to also keep a uniform Android experience.

Samsung rode Android to first place in the smartphone market and would like to have some leverage renegotiating a better deal with Google.  The only way Samsung can get a better deal is to threaten to use different software.  Right now that is not a credible threat, however if Samsung does come out with some Windows Phone models and they get market traction, then Samsung has negotiating leverage with Google.

So I look for Microsoft to continue to push Windows Phone to OEMs despite buying Nokia’s phone division.  I also expect Microsoft to get some OEM wins as the manufacturers continue to search for other options than Android to differentiate themselves.

(4) Office has been morphed to every iteration of Windows with annoying (to me) user interface changes.  Where can it go?  For mobile devices, the human voice is the natural interface for a constrained screen size, so I see a release of Microsoft Office with a voice-and-speech-only user interface.

(5) In 2008 Microsoft offered to buy Yahoo, but then CEO Jerry Yang kept upping the price and really didn’t seem like he wanted to relinquish being CEO no matter what price Microsoft offered.  Well Yang did go and not long after that botched merger.  Still Microsoft is awash in cash and not producing returns fast enough to even keep up with the S&P 500.  Why not buy Yahoo?

Yahoo has the Internet portal brand and their new CEO Marissa Mayer has pushed them into mobile directions that are application-oriented, somewhere Microsoft is not, but needs to be.  So look for Microsoft to start courting Yahoo — again!

(6) Now that Microsoft has Nokia’s phone division, they need to manage it and that means orient it solely to the future.  So I expect Microsoft to sell off the low-end Asha line of phones, which is really the dying Symbian platform, to some Asian manufacturer.  This would be a deal that would be smaller, but not unlike Google selling off Motorola.

(7) Chromebooks with Google’s Chrome OS have shown that thin-client laptops have some place in the market.  In fact even if they are a loss leader, Chromebooks hook users on the cloud and in the case of the Chromebook, Google’s cloud.

This will not be lost on a CEO who was head of Microsoft cloud services and I expect a push for a “light” version of Windows realized by some kind of Windows ultrabook.  It’s copycat, but it makes sense.

(8) After selling off the Asha business, I expect Nokia ex-CEO, now Microsoft VP Stephan Elop to resign.  Elop shepherded the Microsoft takeover of Nokia from start to finish, in fact you could argue that was his mission when he accepted being head of Nokia.  Could Nokia have survived as another Android smartphone maker?  We’ll never know.

(9) Games and gaming has gone way mobile in recent years.  Microsoft has been slow to get on this bandwagon because of their overall difficulty with mobile and solid Xbox sales disguising the longer term trend.  My kids use tablets for gaming and many other parents push this direction too which means the current generation is used to using flat screens, not game controllers, to play games.

So Microsoft has to start integrating Xbox games with Windows Phone games.  Look for it.

(10) The push in data centers is to lower power consumption by using ARM-based servers.  Even Intel is trying to power reduce its x86 line.  What about Windows Server?  We know Windows RT ran on ARM, but it was sluggish and eventually Microsoft withdrew RT tablets as they were too underpowered to run the Windows Desktop (but not Metro).

So I see Windows Server under the gun to run on reduced power servers.  ARM is the natural architecture to support and there is the Windows RT code to leverage, so I expect that offering to be offered.  I also think this architecture rethink will cause Microsoft to consider the Power ISA architecture (formerly known as PowerPC).  Power ISA is pushed by IBM and Windows Server is a more natural sale into an IBM shop, so the sales synergy will trickle down into engineering requirements.  Consideration of Power ISA is also a nod to the weakness of x86 going forward and recognition that one day x86 may just up and disappear from the planet in a big reorg at Intel.  AMD has essentially dropped x86 for servers already.

So there are 10 problems and opportunities for the new CEO of Microsoft to shift and grow the technology and in the process of doing so, remake the company.  Microsoft in 2020 will be a completely different technology company or just an investment bank.


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