#Microsoft #SatyaNadella – How Microsoft Is Overcoming Industry Headwinds : Microsoft’s Windows and Office cash cows once made it the top dog of the tech world. But that heyday, which lasted through most of the 1990s and early 2000s, ended when it missed the market shift toward mobile devices.
That’s why analysts expect its revenue and earnings to respectively rise just 2% and 4% this year. But under CEO Satya Nadella, who succeeded Steve Ballmer in early 2014, Microsoft made sweeping changes to counter its biggest headwinds – sluggish PC sales, OS fragmentation, a poor mobile presence, and weakness in its cloud ecosystems. Let’s discuss Microsoft’s latest strategies to overcome each of these challenges.
Weak PC sales and OS fragmentation
In the past, Microsoft relied heavily on sales of Windows and Office licenses for PC users. However, sales of PCs have fallen year-over-year for seven consecutive quarters, according to Gartner, due to longer-lasting hardware and an increasing dependence on mobile devices.
Meanwhile, Alphabet’s Google and Apple popularized free operating systems. Google and Apple both take a cut of app store sales within their free operating systems – which generates more stable long-term revenue than a one-time license fee.
Since a new license was required for every Windows upgrade, many users simply stuck with older, “good enough” versions. That’s why Windows 7 remains the most popular PC OS with a 48% share of the market, compared to a 23% share for Windows 10.
That fragmentation means that Microsoft must keep supporting outdated operating systems, and that newer features (like Cortana) might only reach a fraction of its users.
Microsoft addressed these headwinds by making Windows 10 a free year-long upgrade for most users, and tethered PCs, mobile devices, and Xbox Ones to a universal app store. The Windows Store remains much smaller than Google Play and the App Store, but it’s an encouraging step toward generating revenue from apps instead of paid OS licenses.
To counter similar problems with Office licenses, Microsoft pivoted toward Office 365, which runs on a cloud-based subscription model. Earlier this year, Gartner reported that Office 365 was more popular than Google Apps among large enterprise customers.
Weakness in mobile and cloud ecosystems
If Microsoft had a viable mobile OS, the slowdown in PC sales wouldn’t be as challenging. Unfortunately, Windows Phone controlled just 0.4% of the global smartphone market in the second quarter, according to IDC. Android and iOS respectively controlled 87.6% and 11.7% of the market.
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