What does the future hold for Microsoft

We like it when the Tame Geek is asked questions and a little while ago, he was asked about Windows 10 and why it may be bad news for the PC industry.

On the Tame Geek social channels, this article from The Register was posted. The article talks about how Microsoft’s decision to make Windows 10 a free upgrade (for a year) may be bad news for PC makers and Microsoft.

Well, the crux of the article is not that it’s immediately bad for Microsoft, but if this is the long term model it could be.
Consider that Microsoft makes no PCs. They make some tablets, that’s about it. (The Surface has less than 0.01 market penetration in to computing, not to mention that the RT will not be upgraded and is effectively as useful as an umbrella made of toilet paper).

The issue comes when you look at where Microsoft make their money; Software licences to businesses and OEM manufactures.
Office and Windows licences account for more than 2/3rds of Microsoft’s revenue and by making their OS a free upgrade (to users that is. No clear messages on business or education I may add) they are playing a little game of catch-up while trying to effectively, buy back some credibility after the market flop that has been Windows 8 (: The Re-Vistaing)!

It will harm them as there’s no reason to buy a new PC if the software is going to get upgraded for free. There’s nothing that drives consumer demand for PCs any more. Companies buy them, but after a recent discussion with a lecturer at Teesside University, there’s a trend that people below the age of 18 don’t own computers, they own smartphones in the majority, tablets feature heavily but only use the desktop computers at College / University.

As the world shifts, there’s no space for a traditional Microsoft. They have to adapt. That’s why the bought Nokia and why they are making the Windows 10 upgrade free (to consumers, for a limited time) so they can change their company in to something more profitable.

They are going to try and replicate Apple’s success. It will work for them, as they have an Ace up their sleeve Apple never had or will ever have: Internet Services and Servers.
I make the Apple point, simply, as today we see that Apple have now taken the record for the largest quarterly revenue of any company, ever.

Apple’s OS is free, it’s hardware is not. The cost of the OS is rolled in to the cost of the hardware. You can afford to do that when you make a minimum of 38% profit on every iPhone sold and you sell 74.5 million iPhones in 3 months.

Microsoft, with the Nokia purchase have this ability now. It will take them time to pivot and build an ecosystem where they can deliver this, but all indications are that this is the direction of travel for Microsoft, which, will kill the consumer PC business. It’s why IBM offloaded their PC manufacture to Lenovo. It’s why HP split their company in two. The days of consumers buying computers are numbered, where as business will always need them. The PC has just become the new stapler.