Microsoft's 2011: Windows 8 Prep, Windows Phone, Android Battles

Microsoft's year saw increased movement toward the cloud, battles with Google, previews of Windows 8 and a struggle to establish Windows Phone.

In retrospect, 2011 could be viewed as the year when Microsoft tried to pivot: away from its desktop-centric focus and toward mobility, from packaged software toward the cloud, from a company in danger of losing its relevance toward ... maybe some semblance of its old, market-dominating self.

Windows

Microsoft started the year off with a bang, announcing at January's Consumer Electronics Show that the next version of Windows would support system-on-a-chip (SoC) architecture, in particular ARM-based systems from partners such as Qualcomm, Nvidia and Texas Instruments. The implications were immense: Windows had long dominated the x86 platform used by traditional PCs, but SoC support opened up the possibility of the popular operating system on mobile devices such as tablets.

"Under the hood there's a ton of differences that need to be worked through," Steven Sinofsky, president of the Windows and Windows Live Division, told the media and analysts assembled for a Jan. 5 press conference. "Windows has proven remarkably flexible at this under-the-hood sort of stuff."

Over the next year, Microsoft would dribble out more details about that next version of Windows, which it started calling "Windows 8" (not necessarily the final name). The company even started an official blog, "Building Windows 8," in which Sinofsky's engineers and other Windows workers rather loquaciously explained the various features in development. By that point, it became clear that Microsoft's intention with Windows 8 wasn't just to port the traditional Windows desktop environment onto the tablet form factor.

Instead, Microsoft decided to re-engineer Windows 8's entire user interface. Unlike previous versions of the operating system, which centered only on the desktop interface, Windows 8's start screen centers on a set of colorful, touchable tiles linked to applications-the better to port it onto tablets and other touch-centric form factors. The beta is due in February 2012, with the final version reportedly later in the year.

But Windows 8 will face some significant hurdles. For starters, Windows 7 isn't exactly an antiquated operating system; released three years ago, it has sold hundreds of millions of copies and managed to erode the support base for Windows XP, Microsoft's reliable but aged operating system. Microsoft will have to make the case to consumers and enterprises that Windows 8 will be worth the upgrade. Second, Microsoft will have to challenge Apple's iPad and other well-entrenched competitors for a portion of the tablet market, which could prove a difficult feat.

Windows Phone

Even as the company geared up Windows 8, Microsoft did its best to promote Windows Phone, the smartphone platform it hoped would compete toe-to-toe against Apple's iPhone and the growing family of Google Android devices.

Since its launch in late 2010, Windows Phone has attracted some strong reviews from the tech press, but Microsoft's overall share of the smartphone market has continued to decline over the past few quarters. That could be partly attributable to a dip in usage for Windows Mobile, Microsoft's previous generation of phone software. But it also speaks volumes about the level of competition in the smartphone arena, where both the iPhone and higher-end devices like Motorola's Droid franchise have made life difficult for any new platform looking to establish itself.

During a July 11 keynote speech at Microsoft's Worldwide Partner Conference, CEO Steve Ballmer described Windows Phone's market presence as "very small." Nonetheless, he went on to insist that other metrics boded well for the platform. "Nine out of 10 people who bought Windows Phone would absolutely recommend it to a friend," he said, reiterating a talking point voiced by many a Microsoft executive over the past few months. "People in the phone business believe in us."

In a bid to invigorate Windows Phone, Microsoft took a pair of massive steps in 2011. In February, it signed a partnership deal with Nokia, with the Finnish phone maker agreeing to make Windows Phone the primary platform for its smartphones. A few months later, it whipped the curtain back on its wide-ranging "Mango" update, designed to bake hundreds of new features into Windows Phone's interface.

According to some analysts, the combination of a more feature-rich platform and a bevy of new devices from Nokia and other manufacturers could help Microsoft gain some traction in the marketplace. In a June research note, IDC predicted that Windows Phone will take some 20 percent of the smartphone market by 2015, surpassing both Apple's iOS and Research In Motion's BlackBerry OS.

However, IDC's estimates hinge on Nokia transitioning smoothly to Windows Phone, something that other analysts perceive as easier said than done. "We would continue to avoid the stock as Symbian smartphone sales are falling off faster than expected and we are skeptical that new Windows Phone (WP) models will be able to replace lost profits," Stephen Patel, an analyst with Gleacher & Company, wrote in a May 31 research note. "Our checks suggest mixed carrier support for Nokia's transition to WP."

By December, Nokia had unveiled the Lumia 710 and 800, its first two devices running Windows Phone; the former is scheduled to hit store shelves in the United States at the beginning of January, its $49 price point meant to compete against the sizable contingent of midrange Google Android devices offered by the carriers.