Cloud business may have saved the day, but Microsoft shouldn't lose its grip on Windows

At the most recent Microsoft  earnings call for the quarter that ended 30 June 2016, amidst all the number crunching, its the cloud segment that clearly stood out. Though the overall revenue from the quarter took a dip, cloud push ensured more than double the revenue from Microsoft Azure services compared to same period last year. Today, Microsoft can boost of 23.1 million Office 365 subscribers, Azure cloud revenue growth by 102 percent and Surface revenue growth of 9 percent. And, its flagship software product Windows 10? Well, not so much.

Ever since Satya Nadella took the helms of the company, the man has been on a mission. This mission seems to be partly on the right path with the cloud businesses doing well. However, the company hasn’t revealed the exact Azure sales, so one can’t really know exactly how big the unit is. But, what has been catching everyone’s attention is the announcement of Windows 10 running on 350 million devices, and the company backtracking from the bold statement made last year about reaching one billion PCs by mid 2018. It is most likely to miss the mark. This announcement along with the dip is owed to bad Windows Phone sales (and the Nokia write-off).

The failing Windows Phone business dropped by massive 71 percent, and the segment is as good as dead. The company had hoped for about 50 million Windows devices being sold, but its sale was in mere fractions. This has cost the company and its targets. We wouldn’t blame Microsoft for this failure, but it is rather its fierce competitors like iOS and Android who have ensured that its targets aren’t achieved. Needless to say, and as we’ve been reiterating, the company is late to the mobile device party.

On the other hand, there has been significant growth in its productivity software business. For instance, Office 365 sale grew 45 percent year-on-year. Companies have moved to subscription-based model and the search revenue has also grown by 16 percent. Search is driven by Cortana that comes with Windows 10 and drives Bing-based searches.

It isn’t hard to tell what Microsoft had hoped, when it gave away Windows 10 for free (ending 29 July), along with Office. Windows licensing and devices (Surface, phones, and Xbox), revenue declined 4 percent to $8.9 billion. “The picture here is complex. Windows license revenue was up. The non-Pro Windows revenue, representing consumer sales, was up a substantial 27 percent; this outpaced the moribund consumer PC market, and was helped by a skew towards more expensive licenses. The Pro Windows revenue, representing corporate sales, was up 2 percent, reflecting a flat corporate PC market,” points out Ars Technica .

Windows has always mattered to Microsoft, and Satya Nadella should ensure that it is not sidelined. When Nadella took to the position of CEO, he was amidst a company that needed a lot of restructuring. Windows 10 was ready to carve a different path. Developers had to write a different code when it comes to Apple or Google and desktops. Windows 10 was to end all of this, and offer a seamless experience to everyone across platforms. While it looked great on paper, the vision didn’t materialise in true sense. Though the newer business have been adding to the revenue, the declines haven’t leveled off yet.

Windows 10 was something people were hesitant to upgrade to, even though it was free. It even made Microsoft cough up thousands of dollars on losing a lawsuit filed against company’s aggressive way of pushing Windows 10 to achieve the number. It is said to be the fastest growing version of Windows of all time. The 350 million  mark  in 11 months is commendable as it took 18 months for Windows 7 to do the same. However, as we reach the end of the free upgrade program, we wonder who would be willing to pay for the software that has been free all this while. Moreover, slow PC growth and not-so-promising hybrids are only going to add to its woes.