Life left in Microsoft and Nokia

Microsoft finds itself in the uncustomary role of underdog, but that only tells part of the story, says SA managing director Mteto Nyati in discussion with ARTHUR GOLDSTUCK.

The one-time all-conquering giant of software, Microsoft, is suddenly finding itself performing an uncustomary role: that of underdog. Aside from a share price that had reached a record low earlier this year, it has also been taking a public relations beating.

The launch of the new Windows 8 operating system (OS) late last year did not set the market alight with new respect, and its recent unveiling of the specifications for the Xbox One entertainment device was vilified for the restrictions it placed on users.

For many companies, that would spell doom. In the past, that kind of response to previous products did indeed cast gloom into the hearts of all at Microsoft headquarters in Redmond near Seattle.

But we are looking at a changed organisation today, says Mteto Nyati, managing director of Microsoft South Africa.

‚”The fact that we’re underdogs gives us a new energy,‚” he says. ‚”The speed at which we move has to be completely different. The level of innovation , the ability to come with a differentiator, our ability to bring all our assets together, we are changing everything we do.‚”

The turning point came a few years ago, when Microsoft released the disastrous Windows Vista OS. It followed it with the acclaimed Windows 7, which is the dominant computer desktop operating system today.

‚”Windows 7 was informed by feedback around Vista,‚” says Nyati. ‚”It was largely shaped by customers. It was a big departure for Microsoft, where you saw an organisation that had become very open to feedback.‚”

The company has responded in the same way to the negative response to Windows 8: it has addressed most of the public complaints most prominently the absence of a Start button and fixed the flaws in the upcoming Windows 8.1.

‚”Windows 8 is a big shift. We’re going boldly into this new world of touch and we need to reinvent our entire ecosystem. It’s not an overnight thing. We always knew it was going to be difficult. Windows 8.1 demonstrates what started with 7: we are listening to our customers. 8.1 is coming out soon, the release cycles are going to be shorter and shorter and our customers are going to get the benefit much sooner.‚”

The philosophy was evident in the Xbox One announcements as well. Within a week of announcing that users would have to be connected to the Internet to use the Xbox One a restriction that was met with howls of disbelief Microsoft backtracked, along with rescinding a number of other restrictions.

It is that near-instant response to criticism that now most differentiates the company from its deadly rival, Apple.

Will it be enough to take on the new giants of consumer technology? Not in itself. But there are many strings to the Microsoft bow. Each, in itself, has come under fire from critics: the Windows 8 tablets are too expensive: the Office 365 online version of Microsoft Office has created too much reliance on the Cloud: the Windows Phone 8 operating system is going nowhere. And so on.

Yet, all of these products and services taken together add up to a powerful product set and a compelling business. Add its market-leading Cloud service, SkyDrive, and it becomes obvious the company is not about to evaporate.

Investors agree, and have boosted the share price by almost a third to near record highs in the past six months.

In the South African context, the most startling Microsoft number of all has been produced by another much-maligned company, Nokia. The two are joined at the hip, with Nokia having committed to using the Windows Phone OS exclusively on its smartphones. The result of the partnership is the Lumia range of phones, which competes in the mid-range and high-end price brackets with the likes of Apple, Samsung, Sony and HTC.

In a South African smartphone market comprising about 13-million phones in use, the Lumia has barely made a dent, with about 2% market share. But the overall installed base only tells half the story. In new sales in the last quarter, Nokia took 9,7% share of smartphone sales. That may only amount to a couple of hundred thousand phones, but it puts the cat among the pigeons of a smartphone market currently dominated by BlackBerry and Samsung.

Globally, Nokia sold 5,6-million Lumia phones in the previous quarter, almost catching up to BlackBerry’s 6-million units sold. In the USA, it has overtaken BlackBerry.

It also means that the Windows Phone operating system itself is gaining ground. South Africa is one of half-a-dozen major territories where phone using the OS outsells the iPhone.

This is all happening before Windows 8 tablets really have a chance to get going in this country. With the release of Windows 8.1 in November, tablets carrying the Microsoft software will have a new lease on life. Already, they are edging towards 10% global market share.

Nyati offers another reason to watch that segment: ‚”The other big change with 8.1 is that it will enable other form factors. We are not going to be stuck in the 10‚” range. We will move more and more into the lower end and we are enabling our partners to be able to go there. The complete package has to be affordable and we will do whatever is required to help there.‚”