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THE NEW MICROSOFT UNIVERSE

By Michael Castelluccio
October 30, 2015
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AP Images for Windows

Wintel—the personal computing hegemony of Microsoft Windows and Intel processors that ruled the computer world for decades—is gone, and Microsoft has had to reinvent itself for today’s computing landscape. The 21st Century Microsoft is a hardware and software group with all the parts orbiting the unifying cosmology of Windows 10.

 

Founded in 1975, Microsoft spent its early years producing software, basically the Windows operating systems and a spectacular cash cow called the Microsoft Office Suite. Everything was going well when the company hit a rather large bump in the road. In 1998, the U.S. Department of Justice and 20 State Attorneys General sued Microsoft for unfair monopolistic practices centered around the bundling of other programs with its OS. Then-CEO Gates didn’t perform particularly well on the stand, and Judge Thomas Penfield Jackson issued findings of fact that stated that Microsoft’s dominance of its OSs constituted a monopoly and that Microsoft had taken unfair advantage against rivals Apple, Netscape, Lotus Notes, RealNetworks, and others. The judge’s solution was to split Microsoft into two companies: one that writes operating systems and one that develops programs like Office.

 

The new century produced a general reversal of Microsoft’s early successes. A stock price that registered $58.38 per share on December 1, 1999, hit a low of $16.15 on February 1, 2009. A new set of bumps had appeared on the road, including the public’s exploding use of the Internet, the ascendency of cloud computing, and the rise of mobile devices. Microsoft’s early attempts to catch up produced some lame smartphones, a line of tablets that were equally flawed, and Windows 8, a new touch-enabled OS for early Surface tablets and PCs that replaced the familiar Start Menu with a collage of tiles and incited a user insurrection.

 

THE THIRD CEO

 

Although the second Microsoft CEO, Steve Ballmer, was Gates’s classmate at Harvard, the third CEO arrived out of the blue, in a manner of speaking. Satya Nadella was the executive vice president of Microsoft’s Cloud and Enterprise Group and helped shape Microsoft’s Azure cloud. He left Sun Microsystems to join Microsoft in 1992 and eventually took over the Cloud Services division in 2011. During his tenure, Cloud Services grew from $16.6 billion in 2011 to $20.3 billion in 2013.

 

Nadella became the third CEO of Microsoft in February 2014, inheriting Windows 8.1 and all of its problems. His success with the Windows OS has been better than notable. The latest version of the OS, Windows 10, was developed on a fast-track. It included the best of Windows 7 and restored the primacy of the Start Menu. It works on PCs, tablets, and smartphones. You can open up to four apps at a time or create additional virtual desktops to switch between. The OS has a voice assistant called Cortana and a new browser called Edge. It also accepts input from keyboards, voice, touch, and handwriting. Oh, and it’s a free upgrade.

 

Evidence of how well Nadella’s team has righted the flagship of the company was announced on Twitter by Yusuf Mehdi, Microsoft’s corporate VP of marketing for Windows and devices. On August 26, less than a month after the July 29 release of Windows 10, Mehdi tweeted that more than 75 million devices were running Windows 10 in 192 countries. His ultimate goal is to have Windows 10 installed on one billion computers—everything from the little experimental Raspberry Pi to smartphones, Xbox, tablets, PCs, smart devices in the home, and everything else that requires an OS.

 

CODE + IRON

 

Perhaps an even more significant direction for Microsoft under its new CEO is the commitment to computing hardware. On October 6, in New York City, Nadella and representatives from a number of Microsoft teams launched six impressive new computing devices, including the latest Surface Pro 4 tablet, a new Surface Book hybrid laptop, Lumia 950 and 950 XL smartphones, Microsoft Band 2 health monitor, and a holographic computer called HoloLens.

 

Two of these computers are positioned to compete directly with two Apple icons. At the launch, presenters pointed out that their new Surface Pro 4 runs 50% faster than the MacBook Air, and the new Surface Book runs at twice the speed of the MacBook Pro. Both have very nicely finished designs and could impact Apple’s sales. All of Microsoft’s new hardware runs various versions of Windows 10.

 

With Nokia now a division of Microsoft, the Surface Pro taking off in a new computing format, and HoloLens almost ready for a variety of markets, the software giant is looking a lot less like your father’s Microsoft.

 

Michael Castelluccio has been the Technology Editor for Strategic Finance for 21 years. His SF TECHNOTES blog is in its 19th year. You can contact Mike at mcastelluccio@imanet.org.


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