A report this week claims that an activist investor who will soon join Microsoft's board of directors will fight to convince the firm to lessen its reliance on Windows. As it turns out, that's actually a fine idea. More to the point, Microsoft is already moving in that direction anyway.
As you might know, ValueAct president Mason Morfit is set to join Microsoft's board sometime early this year, most likely in the wake of whatever decision the firm makes on its next CEO. (If you're curious, my money is on Cloud and Enterprise chief Satya Nadella, as noted in "It's Time for Microsoft to Make the Right CEO Choice.") Unable to influence the CEO decision, Mr. Morfit apparently still has sights set on some strategy changes, according to a reliable report in Bloomberg: He wants Microsoft to reduce its focus on Windows.
That might sound like heresy in some circles, but the truth is, this change has been coming for a long time. Long Microsoft's biggest business, Windows has fallen into third place behind Office and Server from a revenue perspective, a spot it held for all of 2013. As we've discussed many times, individuals are turning away from Windows and traditional PCs to simpler devices such as smartphones and tablets, and they're doing so in ever-increasing numbers. And those devices don't run Windows. They run Google Android, and, to a much lesser extent, Apple's iOS.
Microsoft has tried to stem this exodus with the poorly received Windows 8 and is racing to fix the problems it created—both in the product itself and in its relationships with customers—in updates such as Windows 8.1 and Windows 8.1 Update 1. But the reality is that Windows is destined to be a second-class citizen, alongside iOS and well behind Android. And that's going to be true no matter what changes Microsoft makes to Windows, since the system is ill-equipped for these new types of devices and Android has an insurmountable lead in apps.
Because of this change, Mr. Morfit would like Microsoft to do what many of us have been calling on the firm to do for years: "Accelerate its efforts to unchain products and services from Windows so that they can be more widely adopted on smartphones and tablets." Competing smartphones and tablets.
Morfit would also like Microsoft to emphasize its enterprise and cloud businesses over money-losing businesses such as video games and hardware (read: Surface). These are also common-sense moves, and taken in context with the deemphasizing of Windows, you see the makings of—dare I say it—a fine devices and services company.
I believe Microsoft was arriving, albeit slowly, at this same decision with regard to Windows, thanks to the steady decline of PC sales and Windows revenues.
The firm announced last year that it would port a new touch-based version of Office—something that presumably sits functionally between the "full" Office for Windows and Mac and the Office Mobile offering it provides to Windows Phone, iPhone, and Android handset users—to the iPad sometime in 2014, albeit after the Windows ("Metro") version was complete. But that's too slow.
Given the speed at which the industry is changing, and the speed at which BYOD (bring your own device) is sweeping through traditional IT shops, it shouldn't wait: Full-blown Office versions for both iPad and Android tablets should perhaps more rightly appear concurrently with the Windows version.
I've been examining Microsoft's offerings on Android (see "Android for the Windows Guy: Microsoft Apps") and iOS lately, and it's interesting how both platforms are suddenly awash in Microsoft-authored mobile apps. What's missing, of course, is anything of substance for the big tablets—iPad and Android—and it's hard not to imagine that this is a Windows protection play. It will continue down this path at its own folly.
Indeed, just last week in "Need to Know: Windows 8.1 Update 1 and Windows Phone 8.1," I noted that the combined market for smartphones and tablets—about 1.5 billion units this year alone, or over five times the size of the entire PC industry—is so vast that Microsoft simply can't afford to ignore it, even though its own OS will only power a tiny percentage of those devices. So while it can and will improve Windows, including Windows Phone, it must also serve its customers, whatever platforms they might choose. It's just common sense.
