Nadella Bets Universal Windows Will Advance Cloud and Mobile Share

Despite seeing its profits shrink thanks to its acquisition of Nokia, Microsoft on Tuesday reported a nice uptick in its core business lines -- notably its datacenter offerings -- and strong growth for its cloud services including Office 365 and Azure.

CEO Satya Nadella appeared in his second quarterly call with analysts to discuss Microsoft's fourth quarter earnings for fiscal year 2014. The company exceeded its forecasts for Office 365 subscription growth and saw double-digit gains across its enterprise server lines.

One of the key questions among analysts is what the future holds for Windows and its struggling phone business, now exacerbated. Nadella underscored that bringing a common Windows core across all device types, including phones, tablets, PCs, Xbox and embedded systems, will strengthen Microsoft's push into mobility, as well as the cloud. This is the notion of what Microsoft described to partners last week as the next wave of Windows, which will come in different SKUs but will be built on a common platform -- what Nadella described as "one" Windows that supports "universal" apps.

"The reality is we actually did not have one Windows," Nadella said on Tuesday's call. "We had multiple Windows operating systems inside of Microsoft. We had one for phone, one for tablets and PCs, one for Xbox, one for even embedded. Now we have one team with a layered architecture that enables us to, in fact, for developers, bring [those] collective opportunities with one store, one commerce system, one discoverability mechanism. It also allows us to scale the UI across all screen sizes. It allows us to create this notion of universal Windows apps."

Responding to an analyst question about what it will take to incent developers to build not just for Apple's iOS and Google's Android but also for Windows Phone and Windows-based tablets, Nadella said he believes this concept of "dual use" -- in which people use their devices for work and their personal lives -- will make it attractive for reluctant developers. 

Now that Microsoft has brought all of the disparate Windows engineering teams together into one organization, when the next version of Windows comes out next year, Nadella said it will allow customers to use even their core desktop apps on any device. He's betting that application portability will make it easier and economical for developers to build more apps for Windows.

"The fact that even an app that runs with a mouse and desktop can be in the store and have the same app in a touch-first, in a mobile-first way, gives developers the entire volume of Windows, which you see on a plethora of units as opposed to just our 4 percent share of mobile in the U.S. or 10 percent in some counties," Nadella said. "That is the reason why we are actually making sure that universal Windows apps are available and developers are taking advantage of it. We have great tooling. That's the way we are going to be able to create the broadest opportunity to your very point about developers getting an ROI for building for Windows."

Yet between the lines, the fact that Nadella two weeks ago said Microsoft is a "productivity and platforms" company rather the previous "devices and services" descriptor suggests that the emphasis of Windows is a common platform tied with Office and OneDrive. Microsoft's goal is that this will allow users to do their work more easily, while making it easy for them to use their devices for their personal activities without the two crossing paths. And the most likely way to succeed is to ensure developers who have always built for the Windows platform continue to do so.

Posted by Jeffrey Schwartz on 07/23/2014 at 11:26 AM