Highs and lows for Microsoft in 2013
23rd Dec 2013 | 11:01
Well, that was an interesting year for Microsoft
Sometimes Microsoft can't win for losing, and sometimes it sells 2 million Xbox Ones in just 18 days. 2013 has been the usual mixed bag for Microsoft, with some clear wins – Xbox One, Office 2013, even Windows Phone sales climbing to a respectable level around the world – slightly tarnished by speculation about who will replace Steve Ballmer as CEO, suspicion about how much Microsoft knew about NSA surveillance and some strange marketing choices.
IE 11, Windows 8.1 and Surface 2 are clear improvements on last year's products and despite slipping PC sales it's been an undeniably strong year for Microsoft, but it hasn't been all good news. No sooner did it hit 250 million users and get fully integrated into Windows 8.1 than SkyDrive lost its name, thanks to the High Court deciding that Sky customers couldn't tell the difference. If you look at the other high and low-lights from a busy year, a theme starts to emerge
1. Record revenue, strong share price
The continuing speculation over who will replace Steve Ballmer as CEO (after his surprise announcement that he's leaving before next summer) hasn't hurt Microsoft's share price (although a lot of the increase is down to the way Microsoft is raising money by selling bonds that let it bring overseas profits back to the US). Quarterly profits were up 16% in October, as was revenue which hit a record $18.5 billion. That took the share price over $35 and it's continued to rise, peaking at $38; the last time Microsoft stock looked this good was October 2007.
2. Office 2013 and Office 365 success
Android KitKat users get QuickOffice free, Mac and iOS users get iWorks but 2 million people are shelling out the monthly subscription for the Office 365 Home Premium bundle of Office 2013, Skype minutes and 20GB SkyDrive storage. That's in addition to the $1.5 billion revenue Office 365 gets from business users (and another $1 billion for Lync). The $4.4 billion revenue for the Windows division is still higher, but slowing PC sales aren't slowing Office down.
3. Xbox One
Sony might quibble about whether it's selling more or just started selling PS4 earlier, but despite the backlash about Microsoft's plans to let you play games without the DVD as long as you were connected to the Internet (exacerbated by an employee making offhand comments on Twitter) and subsequent backdown over those plans, Xbox One is a clear success – selling a record-breaking 111,111 units a day and clocking up 83 million hours of entertainment since November. Xbox One is Microsoft's play to be the entertainment hub of the living room, with streaming video, TV integration, big-screen Skype, split-screen apps and voice control courtesy of the new Kinect, so this is more than just competing with PlayStation for hard-core gamers.
4. Patent wins in court
It's been a good year for Microsoft in court, especially against Motorola. Microsoft has won injunctions against Android phones for patent infringement and had Motorola's enormous Wi-Fi royalty claim declared "excessive".
Of course getting those judgements enforced isn't always easy; Google talked customs into allowing shipments of phones that were supposed to be banned from the US market and Microsoft went back to court - winning an appeal but not getting an answer from US Customs. The only really bad patent news was a German court striking down the FAT patent. The same court has done that before, only to have a higher court reinstate it, which might happen again and Microsoft asserts plenty of other patents it says Android infringes, so this is unlikely to affect any of the licences Android OEMs have signed with Microsoft. Of course, Google isn't going to have its Motorola handset division sign a licence any time soon.
5. Windows Phone; getting sales, apps and updates
Big name apps like Instagram, Vine, Waze and Viber are finally coming to Windows Phone (as is Minion Rush) and sales figures are up. In the UK and other European countries one in every ten smartphones sold is a Windows Phone and there are 14 markets around the world where it's outselling iPhone; even in the iOS-dominated US, sales are almost reaching 5%. And while there hasn't been a major update, the GDR2 and GDR3 releases have brought lots of new features. Better still, Microsoft found a way to get updates out to users without waiting for carriers, disguised as a developer feature.
Nokia's gorgeous 6" Lumia 1520 is certainly helping sales, as is the impressive camera on the Lumia 2010. Although Terry Myerson recently teased something special the Windows Phone team is doing with another OEM, Nokia has consistently been the best thing to happen to Windows Phone. With the Nokia team joining Microsoft, we expect a continuing stream of great new handsets – and Nokia's expertise in designing devices, buying components, marketing products and getting them into stores should help the Surface team as well. Perhaps they can deliver the 8" Windows RT tablet the Surface family badly needs to compete with the iPad Mini and Nexus 7, because they've made Windows Phone a real success this year.
1. NSA suspicions
When Edward Snowden leaked details of the way the NSA scoops up information online, initial reports claimed that Microsoft and other companies allowed direct access to their services. Microsoft has always denied this and more details suggest that the NSA has a way of collecting information directly from Internet exchanges, but even though it's moving to encrypt connections and is actually suing the US government to release more details about the information it gets from Microsoft using warrants, some people seem to believe that Microsoft is spying for the government.
2. Scroogled and iPhoned
That makes it hard for Microsoft to criticise Google for collecting lots of information from its users to put relevant ads in its services, but it's not giving up on the Scroogled campaign where it highlights data mining. The approach has been widely criticised, although it does seem to convince people to at least consider Bing – and the T shirts and mugs Microsoft started selling with the Scroogled message on sold out overnight (many of them going to Google employees, we hear). And while Microsoft had some marketing hits this year, including the fantastic Recital commercial for Windows Phone and the Lumia 1020, the videos mocking the iPhone 5C design were quickly withdrawn as being in dubious taste.
This is an area where Microsoft has to fight to avoid a repeat of Apple's success with the far-from-accurate I'm a Mac ad campaign, even though it's a fight Microsoft can't really win.
With its purchase of Nokia, Microsoft once again becomes the only manufacturer of Windows RT devices; the OEMs Microsoft would like to see pioneering different designs for its modern, mobile, secure, tablet-optimised operating system are rushing to build Chromebooks. There's even a Chrome OS all-in-one 'PC' coming, the LG Chromebase. It remains to be seen how well Chromebooks are actually selling and whether they'll stick around, but it's competition Surface didn't need.
4. Google and Windows Phone
Google hasn't released many apps for Windows Phone and when Microsoft made its own YouTube app for Windows Phone, Google blocked it – even when Microsoft rewrote it to fix what Google had complained about. Google said Microsoft had to make it an HTML5 app, even though Android and iOS don't do that. Coming after Google's decision at the end of 2012 to turn off the EAS support Windows 8 used to get email, calendar and contacts into its apps (which also affects Windows Phone, although Google has repeatedly extended EAS support, most recently until the end of 2013), it's clear that Google doesn't want to see its services on Windows Phone – which is a problem for Microsoft.
Microsoft's new mission is devices and services, but it's had a few high-profile problems with services this year. Not everyone was affected, but Outlook.com had problems for up to three days, some Azure storage was unavailable overnight in February when an SSL certificate expired on a Friday afternoon and a DNS problem blocked access to multiple Microsoft services in November – just as the Xbox One went on sale. In most cases, users were back online quickly and no online service is always available, but it's an area Microsoft needs to stay on top of.
- Next up: Windows 8: one year on