14 Million People Are Already Using Windows 10

1 Aug 2015 | Author: | No comments yet »

14 Million People Are Already Using Windows 10.

It’s been a rough quarter for Microsoft. Mozilla chief executive Chris Beard has written an open letter to Microsoft’s Satya Nadella, criticising the company’s decision to make Edge the default browser in Windows 10, even if the user is updating from a system that previously used Chrome or Firefox as the default. The company took a $7.5 billion write-down in its latest quarterly earning report today after conceding earlier this month that its acquisition of Nokia’s handset business wasn’t going to turn it into a viable competitor in the smartphone market. After all, it generated more than US$22 billion in revenues in the second quarter, returned US$6.7 billion to shareholders, pays a 2.6 per cent dividend, and has a ton of cash on the balance sheet.

Mr Beard said he was “deeply disappointed” with the decision, accusing Mr Nadella of throwing away the choice his customers have made about the internet experience they want, and replacing it with the internet experience Microsoft wants them to have. He said that it sends technology backwards, which must be the equivalent of a ‘your mum’ insult for the million dollar technology industry CEO community.

So low has Microsoft’s light dimmed in recent years that last week’s launch of Windows 10 came with a whimper, not a bang – even if it was relatively well received by software critics. After dominating the once high-growth PC market during the technology sector’s heyday and unable to do wrong in the market’s eye, the stock really hasn’t done much for more than a decade. Where Microsoft goes from here depends on chairman and chief executive Satya Nadella, a 47-year-old Indian immigrant facing the gruelling task of returning his organisation to its former glory. They are unsettling because there are millions of users who love Windows and who are having their choices ignored, and because of the increased complexity put into everyone’s way,” he said. The Nokia boondoggle—former CEO Steve Ballmer’s parting gift to Nadella—led to what Bloomberg called the company’s biggest quarterly loss ever.

The problem was simple, and one many industry leaders with near-monopoly positions face: it became complacent even though its key markets started to shift, and it lost focus. Microsoft said that its priority with Windows 10 was to make the upgrade experience as simple as possible, and that it aimed to provide a “cohesive experience” following the upgrade. “During the upgrade, consumers have the choice to set defaults, including for web browsing. Unfortunately, it didn’t result in any meaningful progress, hence this letter.” The letter follows on the same theme, but adds an element of superiority. Understandably, then, Nadella chose to focus on the future instead of that dismal moment now officially in its past during his earnings call with analysts today.

Beard said that Microsoft’s actions do not matter to Mozilla just because it runs a competing browser, but that they could have a detrimental effect on the millions of people who use Windows. “These changes aren’t unsettling to us because we’re the organisation that makes Firefox. He promised a more focused approach not just to mobile but to the rest of Microsoft as well. “Business process, collaboration, communications, these category boundaries are things I believe are going to change,” he said. Nadella talked up the acquisition of field service software company FieldOne; the launch of the Cortana Analytics Suite; and the company’s plans to reach $20 billion in cloud computing revenue in 2018.

As a remedy, in 2010, Microsoft agreed to offer Windows buyers a choice of alternatives such as Google’s Chrome, Mozilla Firefox and Apple Safari when they first booted up their new operating system. And of course Windows 10 is just days away from launch. “While the PC ecosystem has been under pressure recently, I do believe that Windows 10 will broaden our economic opportunities and return Windows to growth,” Nadella said. But perhaps this still-giant player merits a second look, since it will take Satya Nadella, who took over the helm from Steve Ballmer in February 2014, a bit of time to right the ship. In 2013, the EU fined Microsoft £485 million, after the company omitted the ballot from Windows 7 Service Pack 1 for 14 months, from May 2011 until July 2012.

Young entrepreneurs want to be Travis Kalanick of Uber or Evan Spiegel of SnapChat – billionaires within months of setting up businesses, living lives of unimaginable luxury not long after leaving their parents’ spare room. But Nadella, with a background in cloud and enterprise technologies, has given Microsoft a forceful push in the right direction, improving the company’s image in the process, and demonstrating an ability to make difficult decisions.

One example was the recent restructuring of the phone hardware business acquired through Nokia, which produced an impairment charge of US$7.6 billion in the most recent quarter. Microsoft’s historic cash cow Office is meanwhile making a smooth transition to to the cross-platform mobile and cloud world with 150 million downloads of Office Mobile for iOS and Android. Microsoft has essentially written off all Nokia’s devices and services business assets that it acquired a year ago. “The new CEO has definitely implemented a strategy where Microsoft is proving it is successful in adapting,” said Patrick Blais, a senior portfolio manager at Manulife Asset Management. While Nadella may have grown up firmly in the middle class, it was the middle class of Hyderabad, India – thousands of miles from the conspicuous consumption of the wealthy Seattle suburbs.

Nadella said that 50,000 new small and medium businesses adopt Office 365 per month and that the service is already in use at four out of five of the Fortune 500. Ultimately, it seems that if Microsoft can keep convincing the world that it’s a new company with new priorities and new products worth buying, the worst could be over for a company with a starkly uncertain future when Nadella took the helm.

Despite a late-July dip after Microsoft released so-so earnings, the stock is up more than 15 per cent in the past six months, outperforming both the Nasdaq Composite and S&P 500, in large part because the changes Nadella has been making are showing real signs of working. “A number of investors will link Microsoft to the consumer PC market, but there is a lot more happening at the company,” he said. “The company has realized it’s in a new reality. Like thousands of Indian students he completed his education in the US, studying for a master’s degree at the University of Wisconsin before completing an MBA at the University of Chicago – studying at the same time that Barack Obama was teaching law.

Apple is going to be successful, so Microsoft has opened up its system so people that want to use its products can access them irrespective of which device they use.” The company is still a leader in a number of segments, including the productivity software it offers through Office 365. Just like others, Nadella also brought his love of cricket to the US, and he will need to draw on all of the leadership attributes he claimed the game taught him if he is to turn Microsoft around. Despite the story of his modest background, his status as an immigrant and subsequent rise to the top of a company that remains a household name, Nadella himself remains firmly under the radar. Perhaps it is partly because the big founding names at Microsoft have all gone, some many years ago, taking their billions with them and indulging in whatever takes their fancy. It’s already seeing commercial cloud revenues tracking at an annual rate of US$8 billion, so the company’s target of US$20 billion by 2018 looks well within its means.

Morgan analyst Mark Murphy. “We think Microsoft will dominate in the enterprise, and it stands to benefit from a broad and powerful lineup of cloud solutions.” Investors should also be pleased with Microsoft’s improved capital allocation policy. More strategic acquisitions are expected, but perhaps fewer that look like the US$2.5-billion purchase of Mojang AB, the maker of the Minecraft video game. Perhaps to keep investors engaged while it changes gears, the company has become more generous with shareholders, raising its dividend and buying back shares at an aggressive pace to the point where it is now paying back more cash flow to shareholders than it is earning. Rather than respond by saying (as he later claimed, in an email to Microsoft employees, that he ought to have done) that “all women should get equal pay for equal work” – he implied that women should not ask for a pay rise because they should have “faith” that the system will reward them.

The stock may not be ultra-cheap and still a fair distance from its split-adjusted all-time high near US$60, but given that Microsoft is generating more free cash flow than the broader market on average, it still has valuation on its side. Years of attempts to diversify its business from desktop software for personal computers have resulted in one ridiculed or aborted product launch after another. The company still makes a huge amount of money – more than $22bn in quarterly revenue – but its power is fading as more nimble mobile competitors steal its thunder, and Apple, once a minor rival, marches on and on. Microsoft has always been a two-product company, regardless of its other minor successes such as the Xbox gaming system and a recent foray into cloud computing.

The bottom line, and the immense challenge facing Nadella, is that in a world of mobile computing, Microsoft’s products do not promote a rush to buy. The acquisition and subsequent write-down of Nokia, itself a shadow of what it once was, is the perfect illustration of Microsoft’s recent woes: a big, headline-grabbing acquisition followed by a sheepish write-down as the plug is pulled. The influential investment bank Goldman Sachs recently told its clients to sell shares in Microsoft, noting that Microsoft’s results had turned out to be worse than the company’s public forecast for the seventh quarter in succession. The top 10 most valuable brands Benedict Evans, a software venture capitalist and former technology investment banker, wrote last week on the investment website Seeking Alpha about the decline of Microsoft and Nadella’s challenge: “Microsoft today… is a case study in knowing when you should give up, and what you should do after that.

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