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Microsoft's US$84 million man: What's Nadella done to earn it?

Tim Greene | Dec. 18, 2014
Windows 10, cloud gains, lower license fees for hardware vendors are bold moves whose effectiveness is yet to be determined.

What could Microsoft CEO Satya Nadella have done in just 10 months to convince shareholders he's worth the $84 million pay package they approved earlier this month?

Quite a bit, it turns out, but it remains to be seen how his actions will pan out for the company over time, and in fact that long view was taken into account in his compensation bundle. It doesn't allow some hefty stock grants to vest fully until 2021, and how much he ultimately gets is linked to how well Microsoft fares over that time vs other big corporations on the S&P 500.

Still, Nadella has made some bold moves since taking over from Steve Ballmer Feb. 4 that have set in motion what could prove to be significant changes for the company and its customers. Here's a look at some of them and suggestions about what to look for to determine how much success he's having.

Less expensive licensing
Under Nadella Microsoft made Windows 8 available for free to makers of devices with screens that are nine inches or smaller, a program it refers to as Windows for the Internet of Things. The move in April has had results, with such devices now shipping from Acer, Dell, HP, Lenovo and Toshiba priced at as little as $99.

Before that, though, Microsoft also reduced the price of Windows 8.1 licenses by 70% to makers of PCs of any size bringing the price to about $15 per device. The cut amounts to an acknowledgement that other inexpensive computing devices such as Google Chromebooks based on Android are selling briskly. Microsoft needed to do something to make it possible for device makers to produce similarly inexpensive machines based on Windows.

The inexpensive tablets have resulted in a lot of sales to consumers, but not as many to businesses, says Jitesh Ubrani, an analyst with IDC, other than as companion devices to a full laptop for, say, a salesperson.

Just a handful of vendors make these inexpensive Windows devices vs. a massive number selling similar Android devices, he says. Windows is a much larger operating system than Android, requiring 32G vs. 4G to 8GB for Android, meaning the hardware to support Windows costs more than to support Android. So it's harder for manufacturers to sell Windows devices as inexpensively as Android devices and make a profit.

Nadella introduced another free wrinkle called Windows 8.1 with Bing. It comes free to equipment manufacturers so long as the computers they install it on ship with Bing set as the default search engine in Internet Explorer. Some of these devices also come with Office or a one-year subscription to Office 365, another freemium to herd users toward paying Office 365 subscriptions.

 

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