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

By Nicholas Kolakowski  |  Posted 2011-12-28

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

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.


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.

Bing, Cloud and Android



Microsoft also intensified its cloud and online efforts. Thanks to its search-and-advertising agreement with Yahoo, in which Microsoft's Bing search engine powers Yahoo's back-end search, Microsoft owns roughly a third of the U.S. search-engine market. Rather than compete head-to-head with Google, Microsoft has decided to differentiate Bing by making it the search engine for those exploring very specific verticals, such as travel. In addition, Microsoft entered into an agreement with Facebook that adds a number of social-networking features to Bing.

"Decisions don't get made on rationality alone," Bing Director Stefan Weitz told eWEEK in a May interview. "People ask other people for information. Eighty percent of the people making a purchase online will delay that decision until they ask someone else."

In light of that, he continued, Microsoft decided to evolve Bing by "infusing the emotional into it." That meant adding Facebook-fueled social features, including the ability to see, in search results, which Websites one's friends "Liked."

By November, according to research firm comScore, Microsoft had managed to reach 15 percent market share at the expense of both Google and Yahoo, while Google dipped slightly to 65.4 percent.  

The Cloud and Android

In terms of the cloud, Microsoft launched the final version of its Office 365 platform at a high-profile event in New York City in June. Office 365 links Microsoft Office, SharePoint Online, Exchange Online and Lync Online into a platform that costs $2 to $27 per user per month. On top of that, Microsoft began offering an Office 365 Marketplace with productivity applications and professional services.

From 2010 into 2011, Microsoft has pushed an "all-in" cloud strategy centered on subscription products such as Office 365. By embracing an industrywide trend toward the cloud, the company hopes to diversify its revenue stream beyond desktop software such as Windows. Moreover, the cloud model holds certain advantages for Microsoft, as subscriptions ultimately yield more revenue over the long term than a single copy of software (provided the customers in question keep paying for a sustained period of time).

But the cloud comes with its own drawbacks, the most visible of which is the occasional downtime. Over the summer, Office 365 experienced a handful of outages, similar to those experienced by Google and other cloud vendors. The cloud also has yet to generate the sorts of revenue that Microsoft enjoys from its more traditional "boxed" software, with no clear timetable for when those online efforts will start becoming more profitable.

Microsoft's competition ramped up against Google in areas beyond cloud products. Throughout 2011, Microsoft went to companies building Google Android devices with a simple proposition: Either pay us royalties, or face a patent-infringement suit (Microsoft insists that Android violates its intellectual property). That strategy paid off, as a growing number of Android manufacturers large and small (including HTC and Samsung) agreed to pay royalties rather than engage in a wide-ranging court battle.

As for the companies that decided to engage in a courtroom tussle rather than pay up, Microsoft scored a few victories. Near the end of December, the International Trade Commission (ITC) found that Motorola Mobility's Android devices infringe on aspects of one Microsoft patent.

Microsoft executives played up that victory. "ITC finds Motorola patent infringement in Microsoft case. Another indication that licensing is the best path for the industry," Brad Smith, executive vice president and general counsel of Microsoft, wrote in a Dec. 20 tweet, following it up with: "One key step behind us in the ITC. More to follow. But we'll also remain focused on licensing, as we have with Samsung, HTC and others."

Microsoft's competition against Google seems unlikely to abate in 2012, with more legal action in the making, although executives in Redmond likely hope that Windows Phone will gain market share to the point where it can compete more heartily against the growing family of Google Android devices. But Google is just one aspect of Microsoft's challenges for the next year: Apple, and a variety of other rivals will all continue to fight for their own-and Microsoft's-pieces of the cloud, mobility and operating systems. 

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