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Microsoft is the company to watch in 2016

Bill Snyder | Jan. 7, 2016
From innovative hardware to augmented reality and open source, the new Microsoft is bolder and stronger than it has been for years

It isn't often that Microsoft is the company to watch for the new year. But it will be in 2016.

CEO Satya Nadella and his team have shaken things up, surprising customers with better products, a continuing move to the cloud, an embrace of open source, and a willingness to stand up for user privacy in the face of government pressure.

We even have to acknowledge a success that was born in the bad old days of Steve Ballmer: Microsoft's largely successful do-over on Windows 10. Being rooted in the PC era is problematic, to say the least, but the Surface Book is (surprise) an exciting product that shows that the company is taking an old-school product as far as it can go. It's even matched -- or maybe outdone -- Apple with the newest Surface Pro tablet.

There are still major challenges, and if any one area is liable to trip up the Redmonders it's mobile. The ill-conceived purchase of Nokia cost billions, and even worse is the failure to develop a coherent mobile strategy years after it became a necessity.

But the balance sheet is now definitely tilted in Microsoft's favor, which couldn't be said a few years ago. Wall Street makes a lot of bad calls when it comes to technology companies, but it's revealing that Microsoft's price-to-earnings ratio, a measure of future expectations, is higher than Apple's.

Beating the PC makers at their own game

Flawless execution is something few companies achieve, and Microsoft is no exception. Both Windows 10 and the Surface Book have problems that can't be ignored. But unlike Windows Vista or Windows 8, Windows 10's problems are fixable, and so are the issues plaguing the Surface Book.

Microsoft entered the hardware space a few years ago when it became clear that none of the PC makers were likely to produce a decent Windows tablet. The original Surface, particularly the weird and nearly useless Surface RT version, wasn't successful -- in fact, it cost the company a $900 million writedown.

Contrast that kludge with the new Surface Pro 4. It's expensive, but it's powered by Intel's new Skylake processor, and Microsoft has reworked the heat distribution system to allow those chips to run at full speed so that they can tear through demanding applications.

Similarly, Microsoft entered the PC space because the PC makers were boring the buying public to death with unimaginative hardware larded with annoying, andsometimes contaminated, bloatware. You can read the reviews yourself, but suffice it to say that the Surface Book is, to quote my colleague Woody Leonhard, "one sexy piece of hardware." When was the last time you heard someone who is often critical of Microsoft say something like that?


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