A million devices isn't cool. You know what's cool? A billion devices
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One billion is an impressive figure, no? I bet if I told you I had a billion Stormtroopers in my back garden, you’d be simultaneously impressed and highly questionable of my ethics.
My point is – the word ‘billion’ gets your attention. It also sounds cool – just ask Sean Parker.
That must have been Microsoft’s thinking when they announced at the launch of Windows 10, “There’s going to be a billion devices running Windows 10 in 2-3 years time.”
So, coming up to the operating system’s first birthday in July, how is that target looking?
In the last week, Microsoft announced that there are now 300 million devices running Windows 10. Given they need to sell about 330 million licences each year to meet that one billion figure, they’re right on course.
Or are they?
That depends on how you measure success, and what that one billion is made up of.
A ‘device’ running Windows 10 could be anything from a PC, a laptop, a 2-in-1, a mobile, or an Xbox One.
Microsoft still dominates 90% of the PC market, so as you’d expect, the majority of that 300 million is made up of PCs.
The issue here is with mobile. Microsoft sold 4.5 million Windows phones in the second fiscal quarter of 2016, down from the 10.5 million it sold at the same time last year
Apple in that same period? They sold 74.8 million iPhones. And this is currently being slated as a disappointing figure.
Based on those stats, if Microsoft’s one billion device target is reached, then Windows Phone is likely to make up only a miniscule proportion of it.
As The Register points out, “[It’s] unfortunate, because for that billion device number to mean anything, Microsoft really, really needs it to be relevant to phones.”
Why is that?
It’s because the mobile market is still absolutely humungous - roughly 1.8 billion per year. Which makes Microsoft’s phone figures look even worse.
True – mobile isn’t Microsoft’s bread and butter. But can they afford to ignore it?
Apple CEO Tim Cook, coming under some heat (pun intended) for Apple’s recent earnings performance (it was their first revenue decline in 13 years), defended the company’s position:
“Our team executed extremely well in the face of strong macroeconomic headwinds. We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”
There’s that billion number again.
Despite Apple’s revenues dropping by 13% from this time last year, that still means they made $50.6bn.
The iPhone accounts for nearly two-thirds of Apple’s revenue and the company sold 16% fewer iPhones than it had during the same period in 2015.
The thing is, these figures are obviously compared to last year’s figures, just after the iPhone 6 was launched. And the iPhone 6 was a mindblowing success, even by Apple’s standards. In the first 24 hours of their release, Apple sold 4 million iPhone 6 and iPhone 6 Plus devices.
24 hours. It took Microsoft 3 months to get to that figure this year. Sure, having fewer revenues isn't great. But to consider a $50.6bn profit a failure seems a bit odd to me. Especially considering the market Apple dominates (switches from Android to Apple have also increased).
As for the iPhone 7, likely to be released this autumn, InformationWeek reports that “results indicate great interest and expected demand for the iPhone 7 despite the fact that little is known about it. Respondents in the US and China demonstrated greater interest in this year's iPhone 7 than they did for last year's iPhone 6s.”
At the risk of stating the obvious, mobile is a massive market, with a tonne of potential.
The same can’t really be said for the PC market, and yet this is where Microsoft dominate. As ZDnet reports, PC sales figures are now at their worst for 5 years. Even tablet sales are down 15% from last year.
The shining light for Microsoft is 2-in-1 devices. Intriguingly, 2-in-1 devices experienced a significant amount of growth from 2015 (13%) – the only PC device type to do so.
My colleague Paul Burns describes the Microsoft Surface Pro 4 as “one of the most flexible personal and business devices I have ever owned.”
This device – and it’s attractive younger brother, the Surface Book - may well be the saving grace in Microsoft’s one billion device target. Users seem to absolutely love them. It used to be only Apple users who would admit to the fact that their devices gave them tingling feelings.
And the sales figures back this up – Surface sales are up year-over-year by 29 percent to $1.35 billion.
If Microsoft take the same approach with Windows Mobile as they did with the Surface range, that’s when that one billion figure actually starts to look like a big undervaluation.
Writing at the time of the ‘billion’ announcement, The Register argued that the figure itself ‘looked like a goal that is both too easy and too limiting’.
What they mean by ‘easy’ is that PC sales alone could probably get Microsoft to a billion devices running Windows 10.
As well as new PCs, it’s also still free to upgrade to Windows 10 from Windows 7 or 8. By the end of this July, it won’t be, and there’s nothing like a deadline to spur people into action. I suspect Microsoft will be quite a lot ahead of that 330 million figure by Windows 10’s first birthday.
Windows 7 still commands 48% of the desktop operating system market, so that’s a big proportion to go after. The much maligned Windows 8 has 10%, and Windows 10 is sitting at 15.34% - not a bad figure for an OS still in its first year.
However, if Microsoft get to ‘a billion devices’ mostly by selling PCs - a declining market - then is that really success? Shouldn’t they want to be prouder of a figure which shows great gains in growing markets? Like mobile?
Of course, we haven’t seen the reaction to Hololens yet – which will also count as a device running Windows 10.
It seems every technology giant has filed patents (Apple included) pertaining to virtual reality equipment, all viewing it as having huge market potential. This is where Microsoft might find more of those faithful users to grow to love certain brands.