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2015 is make or break for Microsoft

Preston Gralla | Jan. 6, 2015
This year we are finally going to get an answer to one of the big questions in the technology world. For years, people have been debating whether Microsoft will retain its position as one of the world's dominant tech companies or steadily become less relevant.

As for the cloud. Microsoft CEO Satya Nadella estimates that Microsoft reaped more than $4 billion in cloud-based revenue in 2014, and that's expected to grow in 2015. Microsoft's latest earnings report, in late October, showed a 128% year-over-year growth in its commercial cloud offerings, including Azure and Office 365 for Business. (The home version of the subscription-based Office 365 was up 25% over the previous quarter.)

The problem child for Microsoft is mobile. Windows Phone was released in late November 2010, and more than four years later, after billions of dollars spent, including the purchase of Nokia's phone and tablet business for more than $7 billion, Windows Phone will have only a 2.7% worldwide market share by the end of 2014, according to IDC. And that share is heading in the wrong direction, being down from a 3.3% worldwide market share in 2013. Windows tablets have fared only slightly better, with an expected 4.6% market share by year's end.

If Microsoft can't succeed in mobile this year, its heyday of industry influence will be over. Selling Windows and Office will eventually be more akin to a utility business than a technology business, something tried and true that everyone needs but no one pays much attention to. Success in the cloud would keep Microsoft somewhat more relevant. But if Microsoft can't break through in mobile this year, it's not likely to ever happen: If it can't make it after five years, it never will.

What I expect is that Microsoft will have a very good year in 2015, but it won't be good enough. It will succeed with its new versions of Windows and Office, and it will see a lot of growth in the cloud. But Windows Phone will go nowhere (though Windows tablets might get a little bit of a bump because of dual-use devices such as the Surface). But to a great extent, Microsoft will likely be locked out of the mobile future, and the company's influence will continue to wane.

 

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