21
Jan

Microsoft debuts many new products while analysts hypothesize about impact on its revenue model

2-Color-Design-Hi-Res-100px-widthOn Wednesday, January 21, 2015, Microsoft published a webcast on its Windows blog. The reason for the webcast was the debut of a number of new products, each of which is scheduled for release later this year. Readers interested in the presentation can view the entire webcast, titled Windows 10: the Next Chapter via the link just provided.

But despite the freshness of the products presented by Terry Myerson, Joe Bellefiore, and Alex Kipman, not to mention the potential for business expansion (or shall I say evolution?) represented by the feature sets of each of these products, some representatives from the analyst community, who attended the event, in person, appeared to fixate on a pair of negative possibilities:

  1. Windows 10 as a free product (for anyone already owning devices with an authorized licensed copy of either Windows 8.1, or Windows 7, or even a Windows Phone with Windows Phone 8.1) threatening what Shira Ovide and Jeff Elder presented (with reference to Rick Sherlund of Nomura Securities) as “about 19% of Microsoft’s revenue in the year ended June 30”
  2. and an announcement of the company doubling down on its commitment to establish a substantial presence in markets for mobile hardware devices despite a diminished presence, which has shrunk, over the last few years, into what looks to be little more than 3%, respectively, of global consumption of smartphone and tablet devices (I gleaned this data from Ovide and Elder’s article in the Online Wall Street Journal, titled Microsoft Shows Off Windows 10 Software)

I am not disputing the relevance of the above points, but I think the potential negative impact of them has been overstated. My position is predicated on two points:

  1. The first of these is a set of APIs, which Alex Kipman presented. Developers can use these APIs to leverage the artificial intelligence/neural networks/cognition features built into Windows 10 to enable mass market consumption of services likewise only accessible via bigger machines
  2. The second is the Windows 10 Holographic system, including the computer and the Holo Studio development environment. Readers should not overlook the inclusion of JPL (Jet Propulsion Laboratory) in the presentation as a present consumer of the computer. With a very prominent consumer already in place, is it hard to extrapolate other organizations implementing this technology? Perhaps profit-making businesses in, for example, the aircraft manufacturing space?

I cannot provide more detail here about the potential of the APIs, beyond merely noting the extensive market interest in robotics, AI, and machine learning. The revenue potential represented by these two points may cover any revenue short fall from Microsoft’s announced decision to give away the Windows 10 OS for the first year after it is RTM sooner than analysts appear to be thinking.

Ira Michael Blonder

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