Microsoft Is (Sorta) Doomed

On October 27th, 2014, Techpinion’s very own, Brian S. Hall, wrote an article entitled “Microsoft Is Doomed. Doomed!

Brian was, of course, being facetious. Far from predicting doom for Microsoft, he was mocking the Microsoft doomsayers. Let’s take a look at a few of his article’s choicer bits:

I have to believe Microsoft’s latest earnings has finally obliterated all the silly “Microsoft is doomed!” discussion that’s been so bien pensant across the blogosphere these many years. This is a company that generated $23 billion in revenues and is clearly poised for growth.

Repeatedly, the analysts trotted out “jobs to be done” and “the innovators dilemma” and “the smartphone is the computer” to explain why Microsoft was so obviously doomed. How could they all have been so utterly wrong?

Microsoft is welcome to serve up a bowl of tasty claim chowder.

That sound you hear now? That’s Satya Nadella, laughing from his CEO chair in Redmond.

Hmm. With all due respect to Brian, Microsoft is not poised for growth, the critics aren’t wrong yet, there’s no claim chowder to be had here, and I very much doubt that Satya Nadella is laughing about the challenges facing Microsoft.

Truth springs from argument amongst friends. ~ David Hume

The difference between Brian’s view and mine reminds me of a joke:

    Holmes and Watson are on a camping trip. In the middle of the night Holmes wakes up and gives Dr. Watson a nudge. “Watson,” he says, “look up in the sky and tell me what you see.”

    “I see millions of stars, Holmes,” says Watson.

    “And what do you conclude from that, Watson?”

    Watson thinks for a moment. “Well,” he says, “astronomically, it tells me that “there are millions of galaxies and potentially billions of planets. Astrologically, I observe that Saturn is in Leo. Horologically, I deduce that the time is approximately a quarter past three. Meteorologically, I suspect that we will have a beautiful day tomorrow. Theologically, I see that God is all-powerful, and we are small and insignificant. Uh, what does it tell you, Holmes?”

    “Watson, you idiot! Someone has stolen our tent!”

circus tent 3d illustration

Brian, like Watson, is very observant but he’s overlooking the problems that are closest at hand. Just because Microsoft made lots and lots of money last quarter does not mean that all is well. Profits are great, profits are swell, but they do not, the future foretell. For example, Nokia outsold the iPhone for four years after the iPhone’s launch…and we all know how that story ended.


The Microsoft that just brought in record quarterly income, is the same Microsoft that faces severe challenges going forward. First, Mobile is the fastest growing segment in tech and Microsoft has no prospects there. Second, Microsoft’s business model is dependent upon licensing its Windows Operating System to manufacturers and that business model has been disrupted and is no longer viable. Third, approximately seventy percent of Microsoft’s income is generated by its Windows Operating System and its Office productivity suite but all of that income is coming from PCs (notebook and desktop personal computers) and PC sales are flat or declining.

Let’s examine each those issues in one by one.


In 2006, Microsoft Windows ran on about 95% of all personal computing devices in existence.


Today, that number is well south of twenty-five percent and Microsoft itself estimates that number to be around fourteen percent. ((MS COO Turner: We have 14% share of all devices (including our 90% PC share).”~ @maryjofoley) 7/14/14))


In 2010, Microsoft saw that it was nowhere in Mobile and they tried to turn things around with the introduction of Windows 8 and Windows RT. Microsoft was going to use its Windows Operating System as leverage to drive sales of Windows 8 tablets and it was going to use its Office productivity suite as leverage to drive sales of Windows RT.

Four years later, Windows tablet sales are nonexistent, Windows RT is gone, and both Windows and Office are being given away to mobile users for free.

We’re seeing the consumer valuation for those [Offce] start to approach zero,” said Wes Miller, an analyst at Directions on Microsoft, a research firm that tracks the company.

“Lots of consumers don’t need a PC,” said Rick Sherlund, an analyst at Nomura Securities. “They just need an Internet connection. They don’t need Office as much.”

In other words, free Windows and Office on Mobile devices are now being used by Microsoft to 1) mollify their existing user base; and 2) as a freemium product designed to entice mobile users to try, and then potentially buy, the full product. Mollifying Microsoft’s existing base is, in my opinion, a good move. Microsoft needs to milk Windows and Office for all they are worth, for as long as they’re worth something.

However, using freemium to attract new users has proven to be a losing proposition.

Microsoft launched Office for iPad in March and says it’s seen 40 million downloads of the three apps since then. But the full functionality of the apps has only been available to Office 365 subscribers, and it’s added less than three million Home and Personal subscribers since then, at roughly the same pace as it added subscribers earlier.  People have been very interested in the apps, but most haven’t been willing to pay for the full functionality (or already had access to it through existing Home or Business subscriptions). ~ Jan Dawson

[pullquote]Neither Windows nor Office have any significant value on mobile devices[/pullquote]

This is the reality facing Microsoft today: Neither Windows nor Office have any significant value on mobile devices.

The problem with MS Office isn’t the price. Jordan Cooper (@blenderhd)

Exactly right.

User behavior isn’t the same on phones as it is on PCs. ~ Jared Newman

[pullquote]User behavior isn’t the same on Mobile as it is on PCs[/pullquote]

Let me repeat that, because this is the part the many people are still not getting. User behavior isn’t the same on phones (and tablets) as it is on PCs. In other words, operating systems like Windows and productivity suites like Office, have great value on PCs but have little or no value on phones and tablets. Accept that as a fact and your entire understanding of what is happening to Microsoft dramatically changes.

One’s destination is never a place, but a new way of seeing things. ~ Henry Miller

Microsoft is GIVING AWAY both Office and Windows for free…and the move is being met, not with applause but, with apathy:

Was poised to download MS Word, Excel for mobile. Then thought: what do I need them for again exactly? Charles Arthur (@charlesarthur) 11/7/14

Notice how long the web cared about free Microsoft Office for iOS. Times have indeed changed. Sammy the Walrus IV (@SammyWalrusIV) 11/7/14

Mobile is where it is at and Microsoft is nowhere in Mobile.

The high-growth parts of the tech industry, smartphones and tablets, are not built on Microsoft software. Microsoft applications have very little presence on those devices. Meanwhile, on the Internet it continues to be an also-ran to giants like Google and Facebook. ~ Ben Thompson, Stretechery

But perhaps you think that Microsoft is going to make their money in Mobile by selling hardware.


Estimated share of Q3 handset industry profits: Microsoft: -4%, Motorola: -2%, HTC, BB: 0%, LG: 2%, Samsung: 18%, Apple: 86%. ~ Kontra (@counternotions) 11/4/14

Microsoft’s hardware has done nothing but bleed red ink. For an excellent discussion of Microsoft’s hardware woes, check out the Mark Rogowsky’s article entitled: “Amazon, Microsoft And The Quixotic Quest To Sell Mobile Devices“.

CAPTION: Microsoft is never going to make any money off of any of these mobile devices.

If you think Microsoft’s short-term earnings makes their long-term problems in Mobile go away, then you’ve got another think coming.

Business Model

Business models are the best crystal ball technology ever invented. ~ @andreascon

Microsoft makes its money from Windows by licensing the operating system to manufacturers and consumers. Google killed that business model by giving their operating system away for free. Apple piled on by bundling their operating system for free with the purchase of their hardware.

Incumbents are rarely disrupted by new technologies they can’t catch up to, but instead by new business models they can’t match. ~ Aaron Levie (@levie)

Operating systems are losing all of their value. Their price is rapidly moving to zero. Yet Microsoft still makes approximately thirty percent of its income from this dying business model.

Moving from one technology to another is difficult. Moving from one business model to another is one of the hardest transitions there is. But that’s exactly what Microsoft now has to do.

If you think Microsoft’s short-term earnings makes their long-term problems in licensing Windows go away, then you’ve got another think coming.

PCs (Notebook and Desktop Computers)

This is what Windows sales looked like in 1995:


We’ve come a long way since then and yet, in some ways, it would be apt to say that Microsoft is still partying like it’s 1995.

  1. Approximately seventy percent of Microsoft’s income comes from Windows and Office.
  2. Almost all of that Windows and Office income is generated from sales to PC manufacturers and owners.

This presents Microsoft with two problems.

First, PC sales are flat or diminishing. Second, Microsoft’s portion of that diminishing market share is also rapidly diminishing.


The challenge staring Microsoft in the face is the 1.5 billion copies of Windows being used is not increasing and is, in fact, decreasing. … Desktops and notebooks are not growing in sales and not attracting first time buyers in any meaningful numbers. ~ Ben Bajarin







Here are four recent headlines regarding Google Chromebooks.

Chromebook sales increase 67%, Acer holds the market lead

Chromebooks may grab 5% of PC market

Chromebook sales set to nearly triple by 2017, Gartner says

Microsoft’s next big headache: The Google Chromebook

Chromebooks are eating away at Microsoft’s PC sales from the low-end. And Macs are eating away at Microsoft’s PC sales from the high-end.


Apple’s Mac hits record market share in U.S., says latest IDC research. ~ Walt Mossberg (@waltmossberg) 11/6/14

Apple Grabs Record US PC Market Share On Strong Mac Sales in Q3 2014 ~ AppleTree

26.8% of the PCs sold in the U.S. between July 4th and September 1st were Macs. ~ Horace Dediu (@asymco) 9/24/14

Mac reached the highest PC market share since Windows 95 launched. ~ Horace Dediu (@asymco) 10/20/14

The Apple Mac, by itself, easily generates more revenue than does Microsoft’s Windows.

Mac ~$6bn/quarter, Windows ~$4bn. ~ Jan Dawson (@jandawson) 10/24/14



In the third quarter of 2014, Macs took in more than 25% of the back-to-school sales. And at Harvard University, an astonishing 71% of new students owned a Mac computer.

Further, the trend in education is towards tablets and away from laptops.


This is bad news for Microsoft since their presence in tablets is practically non-existent. Meanwhile, the iPad is capturing 90 percent tablet share in U.S education.

The back-to-school season voted and the Mac won… ~ Tim Cook


Good Technology released the latest iteration of its Mobility Index Report, in which it found iOS holds 69 per cent of the enterprise market — that’s nearly seventy times larger than the 1 percent share held by Microsoft. ~ Jonny Evans


Windows Phone activations remain consistent with the six previous quarters: flat at 1 percent. ~ Venturebeat

The iPad took 89 percent of activations during the third quarter, while Android tablets claimed the remaining 11 percent. Windows tablets are yet to make a dent. ~ Jonny Evans


(O)verall, the trends in the enterprise remain unchanged. Businesses prefer iOS, sometimes choose Android, and essentially ignore Windows Phone. ~ Venturebeat

Custom business apps showed a 107 percent quarter-over-quarter growth and 731 percent growth over the same time period last year. And Windows developers are getting virtually none of that business.

If you think Microsoft’s short-term earnings makes their long-term dependency on an ever shrinking PC base go away, then you’ve got another think coming.


(Wall Street) focuses on the waves and not of the currents. ~ Consuelo Mack

Microsoft’s most recent earnings statement was a wave and an impressive wave at that. But if we want to foresee Microsoft’s future, we need to focus on the currents, not the waves, and the tech currents are flowing against, not with, Microsoft.

Wisdom consists of the anticipation of consequences. ~ Norman Cousins

Windows will continue to make money for some time to come, but it is not a growth sector.

Windows has taken Microsoft as far as it could. ~ Ben Bajarin (@BenBajarin) 10/31/14

And Windows is not Microsoft’s future.

Microsoft has many very interesting things going for them and none of them have to do with Windows. ~ Ben Bajarin (@BenBajarin) 10/30/14

Office is transitioning from a monopoly software suite, running on a monopoly platform, to a cloud service, that is just one of many competing cloud services.

Seventy percent of Microsoft’s income is in flux and is either going to go away or is going to transition to something entirely new. And these sorts of things happen “gradually, then suddenly.” ((“How did you go bankrupt?” Two ways. Gradually, then suddenly.” ~ Ernest Hemingway, The Sun Also Rises))

So no, Microsoft is not “Doomed.” But neither is its future assured.

Realizing Windows is not a hegemony will unleash market forces nobody can predict. ~ Jean-Louis Gassée (@gassee)

Ridiculous to say Microsoft is doomed. But entirely sensible to wonder whether (and how much) it will shrink in the next few years. ~ Jan Dawson (@jandawson) 10/23/14

In fact, the one thing we know for certain is that the Microsoft of tomorrow is going to be radically different from the Microsoft of today. So, in a way, the monopoly Windows and Office supported Microsoft that we know is — sorta — doomed as it makes way to the unknown Microsoft of tomorrow.

The Promised Land always lies on the other side of a Wilderness. ~ Havelock Ellis

And if you think the magnificent earnings of a single quarter are going to change the fact that today’s Microsoft is a Microsoft in transition — not just from one or product to another, but from one business model to another — then you’ve got another think coming.

iWork vs. Office: Apple Chooses, Microsoft Faces a Dilemma

iWork photos (Apple)

Apple took a big step last week when it made its iWorks apps–Pages, Numbers, and Keynote–free to buyers of new iPhones, iPads, and Macs. But the redesign of the programs themselves may have been a bigger, if less commented-upon move. Apple has finally decided what it wants iWork to be, and the decision should cause some real unease at Microsoft.

Apple has always been ambivalent about these productivity apps, first announced for the Mac in 2005. On the one hand, it seemed to want to challenge Microsoft Office. On the other, it wanted them to be simpler tools for the rest of us. As is often the case with indecision, Apple landed squarely between stools. Although the apps, particularly the Keynote presentation program, were embraced by some professionals, they never posed a serious threat to the domination of Office, even on the Mac, in business. At the same time, the desktop programs, which were last updated in 2009, were more complex than necessary for most consumers.

The rise of the iPad forced a choice. Apple knows that its customers are increasingly using iPad as primary computing devices, so it is promoting the use of its tablets to create documents, not just look at them or edit them lightly. To promote this, it has redesigned both the OS X and iOS versions of the software to be as alike as possible in both appearance and function.

Pages Mac and iPad screenshots

A Rich UI for the Mac. The apps are still significantly different. The OS X version has a considerably richer user interface that takes advantage of the larger displays and pixel-precise selection available on Macs. The only real storage option available on the iPad is iCloud, though that does make syncing documents between devices simple (The real time updating demonstrated in the Apple keynote was an illusion; in the real world, it takes up to a few minutes for documents to sync across the internet.) And the Mac, you has access to all the fonts installed on your system, but if you go beyond a core selection, substitute fonts will be used on the iPad (I’m assuming that no one wants to do much of this on an iPhone) because on iOS, the fonts you get are the fonts you have. But in many key ways, the apps are remarkably alike on different types of devices.

Of course, the price paid for this is a considerable simplification of the OS X versions. This set off predictable protests from the vocal minority of professional users who had come to depend heavily on the advanced features. Apple support forums filled with complaints, especially about Pages. (Keynote, perhaps because it is widely used internally to create Apple presentations, underwent less change. No one seems to much care about Numbers.) Seth Godin, who understands why Apple made the choices it did, complains, “Features and the goal of building for a craftsman are exchanged for the cross-platform ease and gimcracks that will please a crowd happy enough with free.”

Upsetting the faithful. It is unfortunate that in simplifying iWork, Apple has upset some of its oldest, loyalist customers, who may now need another program for creating complex documents (and it will be interesting to see where they turn, but that’s another article.) Apple wants iWorks to be software for the mass market, a customer base that increasingly wants to create on their iPads. For most of them, iWork is good enough on the Mac and the best thing available on the iPad. Consumers who don’t need to create (or handle; iWork apps can read Office document formats, but the conversions are often imperfect) large or complex documents or formula- and macro-laden spreadsheets don’t need Office. And if they want to switch freely between Macs and iPads, they don’t want it.

Microsoft, meanwhile, doggedly refuses to get it. In a blog post following the Apple announcement, communications chief Frank Shaw wrote:

And so it’s not surprising that we see other folks now talking about how much “work” you can get done on their devices. Adding watered down productivity apps. Bolting on aftermarket input devices. All in an effort to convince people that their entertainment devices are really work machines.

In that spirit, Apple announced yesterday that they were dropping their fees on their “iWork” suite of apps. Now, since iWork has never gotten much traction, and was already priced like an afterthought, it’s hardly that surprising or significant a move. And it doesn’t change the fact that it’s much harder to get work done on a device that lacks precision input and a desktop for true side-by-side multitasking.

As Harry C. Marks wrote in a Tech.pinions post yesterday, Microsoft has long avoided making hard choices between consumers and enterprise, between tablets and traditional PCs. The result is “no compromises” hardware and software that, in fact, represent the most dreadful compromise of all. So far, Office has remained true to its heritage.  It exists primarily to serve enterprise and government users, who are dependent on such features as very sophisticated, fine-grained change tracking and citations. But even the touch-enhanced Office 2013 remains all but unusable on a pure touchscreen tablet.

Choices for Office. Microsoft has promised touch-first versions of Office apps next year for both Windows and iOS and Android tablets, and it will be very interesting to see what choices they make. The complex, multilayered interface has to be simplified drastically, and unless Microsoft has found some until-now unimagined UI trick, that means that a lot of features are going to have to be stripped out.

But Microsoft has far fewer degrees of freedom than Apple. For one thing, Office is crucial to the company’s continued prosperity, while iWorks wasn’t even a footnote for Apple. Apple could afford to throw iWork power users overboard because, despite their passion, their numbers are small, while the users of advanced Office features are the heart of the market. Microsoft can afford to lose the Office consumer market, but it cannot ignore the growing use of tablets, most of them Apple’s, in the enterprise.

Will a redesigned Office be simple enough to work well in a touch-only environment? Will it still be Office in more than name? Apple has made its choice, though, in fairness, it wasn’t a terribly hard one. Microsoft has no easy way out of its dilemma.


Why Does Microsoft Make It So Hard?

Surface with Excel (Microsoft)Are you planning to use a new Microsoft Surface for business? You might want to think again, at least if you are concerned about legal niceties.

At ZDnet, Windows guru Ed Bott examines the strangely complex  legalities of using Microsoft Office on Surface. Office 2013–at least its Word, Excel, PowerPoint, and OneNote applications–is part of the Surface’s Windows RT operating sustem. But the bundled software, Office Home & Student 2013 RT, prohibits use of the programs “for any non-profit, commercial, or other revenue-generating activity.” Which seems to mean that if I were writing this in Word on a surface, I would be violating the license.

It’s not as though you have a choice about the version of Office on your Surface. Office RT comes with it and is the only version that can be installed. (The forthcoming Surface Pro will support any Windows version of Office, but probably does not come with any Office software included.)

There are several ways out of this. If the Surface is owner by a company and if the company has an Office Volume License Agreement, the restrictions are waived. Same if you subscribe to a business version of Microsoft’s forthcoming Office 365 service, $150 a year for Small Business Premium, $20 per user per month for Office Professional Plus.

Bott says you are probably also in the clear if you own a fully licensed version of Office 2013 Professional and maybe Office 2013 Home & Student, although those products won’t ship for a couple of months.

Pages, Numbers,  and Keynote aren’t the greatest word processor, spreadsheet, and presentation software in the world. But at least if you buy these iPad apps, for $10 apiece, you can use them for whatever you damn well please.


Office for iOS and Android Embodies Microsoft’s Strategic Failings [Updated]

Microsoft product manager Petr Bobek has confirmed that (Microsoft) is planning to release native iOS and Android versions of Office 2013 next year. Speaking at a press event in the Czech Republic earlier today, Bobek told Czech site IHNED that native apps will be made available from March 2013. ~ via The Verge

— Office for iOS will be introduced almost 5 full years after apps for iOS were introduced in April of 2008.
— Office for iOS will be introduced over three full years after the iPad was introduced in January of 2010.

Those gaps in time embody the lapses in Microsoft’s strategic thinking. Either Microsoft should have made Office available or they shouldn’t. And if they were going to make Office available, they should have done so at the earliest possible moment. The fact that it took Microsoft five full years to make up its mind and implement its policy is emblematic of why Microsoft has gone from the most valuable computing company in the world to a company that is being out-profited by a single device (the iPhone).

UPDATE: Microsoft today disavowed comments made by its Czech subsidiary that the company will roll out iOS and Android apps of its Office suite early next year.

“The information shared by our Czech subsidiary is not accurate. We do not have anything further to share at this time,” a company spokesman said in an email Wednesday. ~ via Macworld

Mea culpa. I usually don’t comment on rumors and this is one of the reasons why. However, this one seemed rock solid. I’ll refrain from building my analysis on rumors in the future.

The Mysteries of Office 15

As Microsoft works on the next release of Windows, it has been remarkably forthcoming about its details. The Building Windows 8 blog has not only laid out the changes in the new version, but the thinking behind them.

Office logoBut Microsoft has said almost nothing about the new version of Office it is developing in parallel with Windows 8. It has distributed an early version to a select group of testers, but wrapped it in a non-disclosure agreement. We’re not likely to get the full details on Office 15 (a development name unlikely to be used for marketing) until a public beta is released this summer.

The new Office is a big deal, perhaps the most important release in the suite’s history because Microsoft has to pull off a number of difficult and contradictory things. On one level Office and its associated back-end components such as Exchange and SharePoint are both mainstays of enterprise technology and by far the most important source of Microsoft profits. The last thing enterprise customers want to see is a drastic change in Office.

At the same time, Microsoft must deal with a revolution in user devices. Conventional PCs are giving way to tablets and, to some extent, smartphones. Even in the enterprise, where desktops and laptops will continue to rule for a long time, mobile executives and field workers are depending more and  more on tablets and phones.

Office as it exists today is a catastrophe on any sort of touchscreen device, let alone one with a 10″ or smaller display.  Starting with Office 2007, Microsoft began replacing Office applications’ traditional cascading menus with a “ribbon” of choices. For a traditional mouse-driven user interface, this is probably an improvement, but it’s no help for touch.

The Word 2010 ribbon
The Word 2010 ribbon






The little icons on the ribbon (above) are too small to hit reliably with a finger, and most of them open a window or drop-down with additional icons or menu choices. In addition to the difficulty of navigating this clutter by touch, the ribbon occupies an amount of real estate that is intolerable on a tablet, let alone a handset. And Office as it exists today is way, way too big for the limited storage capacity of tablets.

Still, the richness of functionality that all those icons represent is the essence of Office. It’s true that many consumers never use 90% of the functions, but in a business setting, complex options such as edit tracking, table of contents creation, and mail merge are often regarded as essential. It’s not at all apparent how this sort of rich application can exist in a simplified, touch-optimized user interface like Metro, which will be the default paradigm for Windows 8.

It seems likely that Microsoft will end up with two versions of Office, a classic UI for traditional PCs and a stripped down and simplified Metro UI for tablets. How seamlessly can these two versions co-exist? Will the simplified version be able to display complex content correctly (this has historically been a problem with all programs that purported to offer limited editing of Office files)? How do you even begin to make Excel useful on a tablet? Can  Microsoft developers find a way to bring full offline functionality to Outlook without downloading a multi-gigabyte database?

This is only the beginning of a very long list of questions about how this new two-headed Office should work. And it doesn’t even touch on the question of how much Office functionality will be available in the version that is to run on tablets powered by ARM rather than Intel processors. (Intel users will, in theory, have the option of running older, classic versions of Office. ARM users will not.)

Depending on how strictly testers adhere to their NDAs (and how serious Microsoft is about enforcing them) we may begin to get some answers soon. A version of Office that makes business users productive with their key applications could be a big competitive advantage for the forthcoming Windows tablets. But making this work will be one of the biggest challenges Microsoft has ever faced.