Microsoft Corporation’s (NASDAQ: MSFT) Windows and Office programs were once the leaders in the technology industry. However, these glory days ended when the market transitioned towards mobile devices. This is the reason market experts anticipate the software giant’s earnings to increase by just 4 percent and its revenue to climb by only 2 percent this 2016.
Yet, under Chief Executive Officer Satya Nadella, who replaced Steve Ballmer two years ago, the company made significant changes to overcome obstacles, such as weak PC sales, weak mobile presence, OS fragmentation, as well as its poor performance in the cloud market.
It is no secret that the tech company has relied significantly on Office and Windows licenses sales for personal computers. Yet, Gartner stated that PC sales have declined for 7 straight quarters on a year-over-year basis because of the higher dependence on mobile devices and longer-lasting hardware.
Additionally, in order to upgrade Windows, users have to purchase a new license. As competitors including Google and Apple popularized operating systems that are free of charge, these companies managed to grab a share of app store sales.
This issue was addressed by the software giant by turning Windows 10 into a free year-long upgrade for the majority of users. Although the Windows Store is relatively smaller compared to the App Store and Google Play, it is a good initial step towards obtaining revenue from applications instead of paid licenses.
Furthermore, the company also shifted towards Office 365, which is cloud-based subscription. Gartner pointed out earlier this 2016 that the service was more well-known in comparison to Google Apps among huge enterprise clients.
As the tech giant lacks a viable mobile platform, it is difficult for the company to expand its features that are cloud-based, such as Cortana and Bing Search. Without users feeding data to these, the general usefulness of Azure, its cloud platform, as an analytics tool slumped.
To address this, the company lowered the number of smartphones it would roll out each year and focused on releasing major applications such as Office 365, Cortana for Android and iOS, Bing, as well as OneDrive. It has also teamed up with several Android OEMs to pre-install these applications on devices.
With Microsoft’s new Surface 2-in-1 devices and Continuum, the company is trying to blur the line between personal computers and mobile devices. Continuum is a feature of Windows 10 that can convert Windows 10 mobile devices into full PCs. This strategy leverages Microsoft’s strengths in personal computers to promote all-in-one devices that can replace mobile devices and PCs.
Just recently, the company combined the Microsoft Research and Information Platform Groups with the robotics, Cortana, ambient computing, and Bing teams to establish the new AI and Research Group, which will infuse the applications of Microsoft with artificial intelligence features, and other related features that will grow the cloud infrastructure.
With all these efforts, we strongly believe that CEO Nadella’s strategies are more effective compared to the previous ones. Furthermore, we are positive that these could offset the company’s outdated reliance on PC sales and licensing fees one step at a time.
As of 10:34 AM GMT -4 on October 10, the MSFT stock is changing hands at $58.34, up by 0.93 percent or 0.54 points.