News

POV: Microsoft Goes Mobile

MINDSHARE POINT OF VIEW - In a major effort to regain some sort of relevance in the increasingly duopolised world of smartphones and tablets, Microsoft has recently made two major announcements. First it confirmed that its Office suite of products is to become available on iPad and then said that it would be offering its mobile operating system to device manufacturers free of charge, a change to its previous strategy of insisting on payment.

Background.  In a major effort to regain some sort of relevance in the increasingly duopolised world of smartphones and tablets, Microsoft has recently made two major announcements. First it confirmed that its Office suite of products is to become available on iPad and then said that it would be offering its mobile operating system to device manufacturers free of charge, a change to its previous strategy of insisting on payment.

Details/Implications.  The lack of Office on iPad has seemed like a major missed opportunity for some time.  However, in contrast to when Bill Gates famously joined Steve Jobs on stage back in 1997 (via video link) to announce that Microsoft had committed to releasing Office for Macs, this time it feels more like Apple is doing Microsoft a favour (in 1997, Microsoft dwarfed Apple – now Apple’s income from iPhones alone exceeds Microsoft’s total revenues). This is essentially an admission that products like Office are not enough of a selling point for people to buy a Microsoft branded tablet and that tablets are likely to overtake laptops as the primary domestic computing device.

To summarise, it has been estimated that Microsoft’s share of personal computing sales (devices sold that include its software) has fallen from around 90% to less than 20% in the last 5 years.

That figure also explains the other announcement, that Microsoft’s mobile operating systems will now be available to device manufacturers for free (on devices with screen sizes smaller than 9”). Because of Microsoft’s success in squeezing patent licensing payments out of companies that use Android, it will now make more money out of Android phones than Windows ones. It will also make Windows a cheaper option (free) than Android (not always free). At the same time it has reduced some of the hardware requirements for its mobile systems making it even easier for its OS to be used on lower-cost smartphones.

In most markets, Android is winning the smart-phone battle (at least from a share point of view, Apple’s profitability is much higher) though all of the Android tablets haven’t really hit iPad’s dominance in tablets. These two developments position Micrtosoft much better in both categories: making the mobile OS free means Microsoft becomes a real alternative to Android in the fastest growing device category globally, whilst Office for iPad means Microsoft could now stand to gain from Apple’s continuing dominance in this area. Although traditional PC sales are declining, there can be no doubt that many businesses still rely on Office and this means that many more of them are likely to continue to buy it.

Summary.  A number of Microsoft’s decisions in the final days of Steve Ballmer’s reign as CEO raised eyebrows (buying Nokia, previously the only real adopter of Windows Mobile was one) but these two announcements suggest that new CEO Satya Nadella may have a more pragmatic view of the company’s future. Whilst the thought of having to create apps for three mobile operating systems isn’t one most brands would welcome, competition is always to be welcomed.  There may finally be a third horse in the mobile race.