SEATTLE — Microsoft CEO Steve Ballmer has been known to use hyperbolic adjectives, but was he on the mark when he described 2012 as “the most epic in Microsoft history”?
It was the year, after all, in which the company debuted Windows 8, a radical revamp of its flagship operating system.
It was also a year when Microsoft offered or previewed new versions of nearly all its products and services; debuted its first branded computing device, the Surface tablet; and announced it was moving from focusing almost primarily on software toward becoming a devices-and-services company.
So how epic did 2012 turn out to be?
“There’s a term in aviation: V1. It’s when an aircraft has reached a velocity at which it has to take off,” said Wes Miller, an analyst at independent research firm Directions on Microsoft.
In 2012, Microsoft’s efforts were all about achieving V1.
And now, “we’re heading toward cruising altitude but we don’t know how long that will take or how bumpy it will be,” Miller said.
Ballmer spoke often in 2012 about Microsoft’s transition into a devices-and-services company.
It made several significant steps in this direction, including focusing on Office as a subscription service and offering the Xbox SmartGlass application, which attempts to better connect the company’s devices to the content offered through its Xbox console and Xbox Live service.
Such a move was needed given the shift toward mobile devices and connectivity everywhere.
“What we might have previously characterized as separate areas of competition - in devices, in content, in cloud services, in operating systems - really are now one large competition among a couple of key players: Apple, Microsoft, Google and Amazon,” said Charles Golvin, an analyst with Forrester Research.
That means the companies are battling for customer investment and loyalty to an entire ecosystem marked by the services and content the company provides, accessible via its devices.
Microsoft and Google have been fighting on a number of fronts, and the battles seemed to escalate in 2012.
The two companies fought over patents in courtrooms in several countries. They battled via ad campaigns over transparency and privacy practices. And, most recently, Google tinkered with its mail, contacts and calendar-syncing technology in a way that makes it difficult to be used with some Microsoft technology.
A large part of the friction comes from Google’s inroads into areas traditionally dominated by Microsoft.
“The subtext is: What used to be a battle between the two companies in the consumer space has clearly bled over into the enterprise space as well,” Forrester’s Golvin said.
Other changes also have hit the company.
Mere weeks after Microsoft debuted Windows 8, its chief shepherd, Windows President Steven Sinofsky, left the company.
The announcement was sudden and largely unexpected. The consensus on the cause: Sinofsky, though known for delivering products on time, also was an abrasive, controversial figure at a time when Microsoft needed a more collaborative approach within the company and with its partners.
Two of his top lieutenants are now taking the reins in the Windows division. Julie Larson-Green, formerly head of program management for Windows, will lead all Windows software and hardware engineering. Tami Reller, chief financial and marketing officer for Windows, also will take on business and marketing strategy for the division.
Among the significant events the company had been working toward for years came Oct. 26, when Microsoft debuted Windows 8 and Windows RT (the version of Windows 8 designed to run on ARM-based chips - primarily mobile devices).
Reports have been mixed on how successful they’ve been so far.
Microsoft said 40 million Windows 8 licenses were sold in its first month, outpacing Windows 7 in upgrades.
While that seems to be a good start, given how much the company spent on marketing, 40 million is “modest at best,” said David Johnson, an analyst at Forrester Research.
Forrester found that interest in Windows 8 among large businesses was higher than expected.
Among consumers, Forrester found that buyers were reporting confusion with Windows 8 and problems with applications not working correctly, though once they got past the initial learning curve, many using Windows 8 on touch-screen devices seem to like it.
Microsoft built much buzz for the late-October launch of Surface, the company’s first branded computing device.
But the buzz didn’t necessarily translate into big sales or exclusively glowing reviews. In fact, the reviews were mixed, with most praising the hardware but, ironically, dinging the software.
Microsoft has not released sales figures for Surface, which initially had been sold just in Microsoft retail stores and online.
The company has since pushed up its schedule to produce more Surface units, selling them now at big-box retailers such as Staples and Best Buy.
Al Hilwa, an analyst with IDC, said he regards Surface as an experiment to help Microsoft’s hardware partners “imagine what Windows devices might look like” and “see how far down this path to go.”
Also in October, Microsoft launched the latest version of its 2-year-old smart-phone platform at an event designed to showcase how its tiled design and features can make it a very personalized device.
It’s too soon to say, though, whether Windows Phone 8 will finally allow Microsoft to significantly increase its smart-phone market share from about 3 percent in the U.S. and 2 percent worldwide.
Early signs show a bit of progress. In the 12 weeks ended Nov. 25, Windows Phone held 5.1 percent of global smart-phone sales, compared with 1.7 percent the year before, according to Kantar Worldpanel ComTech. In the U.S., it held 2.7 percent in 2011 compared with 2.1 percent in 2012.
Will Stofega, an analyst with IDC, said he understands why Microsoft has been focusing on reaching consumers with its Windows Phone. But he thinks Microsoft needs to start pitching more aggressively to largebusinesses as well.
Though overshadowed by Windows 8, the launch of Windows Server 2012 is “the hidden gem in the year,” said Michael Cherry, an analyst with Directions on Microsoft.
Cherry called it “an excellent release, chock-full of improvements to the core services including networking, storage, virtualization and management.”
The only downside he sees is a lack of documentation about how to implement the improvements.
In September, Microsoft introduced the next versionsof its Office productivity suites, to be offered in the first quarter of 2013.
The most drastic change: In addition to selling Office the traditional way - in a box or downloaded - Microsoft will be offering it via a subscription service.
Dubbed Office 365, this online version of Office had been available to small businesses for a while. But with its debut this year, Office 365 will be available to consumers for $8.33 a month (or $99.99 a year), for use on up to five PCs or Macs.
From what he’s seen of preview versions so far, Directions on Microsoft analyst Miller called the next version of Office “really thoughtfully designed.”
Business, Pages 10 on 01/07/2013