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Why Microsoft releases a new version of Windows

Satya Nadella, CEO of Microsoft Corp., speaks at an event in San Francisco, California, USA, on Thursday, March 27, 2014. Nadella presented Office software for Apple Inc.’s iPad and explained how he plans to more aggressively press the company’s applications on competing platforms after Windows for mobile devices failed to detect.

David Paul Morris | Bloomberg | Getty Images

In 201

5, as Microsoft was preparing to release the Windows 10 operating system, a developer evangelist who spoke at a technical session during a corporate event dropped an eyebrow-raising statement. “Windows 10 is the latest version of Windows,” he said. But last week, Microsoft announced an online event to unveil “next-generation Windows.”

Six years after the comments, the world’s second most valuable public company has good reason to change direction. While Microsoft has diversified its business over the past three decades, Windows definitely still matters to the company’s identity and finances. The company logo is still a window.

Here are nine possible reasons for Microsoft’s decision to release a major update, which some suspect may be called Windows 11, instead of just an additional upgrade twice a year to Windows 10:

  • That’s good for business. Shipping new versions of major products that Windows has previously led to an increase in Microsoft’s revenue growth, the company said. This has happened in part as a result of people buying PCs with Microsoft software pre-installed by manufacturers. Historically, Windows has had a higher operating margin than the whole of Microsoft, and keeping Windows growing can make the company more profitable.
  • Tough buddies. Coronavirus benefited PC makers, including Microsoft, as people rushed to buy computers to work and take courses at home. The technology industry’s research firm Gartner estimates that PC shipments in 2020 grew faster than they had done in a decade. It raised the growth rate of Windows license revenue related to consumer PCs. As a result, Microsoft can release Windows updates that entice people to buy new computers, so that comparing results against pandemic computer crashes does not give weak presentations to investors.
  • Google threats. The threat from Google’s Chrome OS has undoubtedly never been greater, as people ran for cheap Chromebook laptops running the Google operating system instead of more traditional Windows or Apple macOS computers. According to Gartner, computer makers shipped 11.7 million Chromebooks in 2020. That’s still small compared to 79.4 million shipments of PCs, but Chromebooks grew 200% while PCs grew by about 11%. The challenge Microsoft faces is to entice people to come back.
  • The Apple threat. Apple has posed a threat to the Windows ecosystem by introducing Macs running their own Arm-based M1 chips, which boast more impressive battery life than Intel-based PCs. Microsoft and other PC manufacturers have come out with Arm-based Windows 10 computers, but software compatibility issues have made the computers difficult for reviewers to recommend. Microsoft can improve that situation. “If Microsoft and the PC OEM ecosystem are able to offer an almost identical user experience across Windows on x86 and Windows on Arm for the fat tail of productivity applications that really matter to users, plus longer battery life, performance per watt and 5G (via Qualcomm) approaching M1, we think it will be a big winner for Windows, “wrote Rosenblatt Securities analyst John McPeake, who has a buy rating on the Microsoft stock, in a note distributed to analysts on Thursday.
  • Increases the surface area. It’s nowhere near as big as Windows or other Microsoft franchises like Azure and Office, but Microsoft is still selling its own line of Surface PCs that can be made more exciting on the shelves. Surface revenue grew more than 30% in the second and third quarters of 2020, but it is still far from Chromebook-style growth. A new life can give consumers a new look at Surface Pro convertible tablets, whose basic hardware design has not changed much since its debut in 2012.
  • Get older. By pumping out two Windows 10 updates per year, Microsoft keeps the operating system fresh. It is still almost 6 years old, which means that it has existed longer than any of its predecessors.
  • Improve the brand. A brand new Windows can help with the company’s general perception. Windows 10 is the world’s most popular operating system, with over 1.3 billion devices using it. If the company can persuade users that the operating system is evolving, they may feel that the company’s innovation is alive and well, and it may make them more willing to pay for other Microsoft products, such as subscriptions to Office productivity software.
  • Developers. If Windows is updated, software developers may bring their software to the operating system to take advantage of renewed public attention. “Of course, Windows was largely successful because developers chose to build their applications for Windows,” said Chris Capossela, Microsoft’s head of marketing, during a conversation with Evercore analyst Kirk Materne on Monday. The company can benefit from getting more hot properties to the App Store for Windows. If people spend more time in the store, they can also spend more money in the store.
  • The pursuit of perfection. There is still room for improvement in parts of Windows 10, which annoys some users with product promotions and software update alerts. “Our ambition with Windows 10 is to move people from having to choose to love Windows,” Microsoft CEO Satya Nadella told analysts at a conference call days before the company released the operating system in 2015. A documentation page on Microsoft’s website states that “Windows 10 has a much higher Net Promoter score than Windows 7. “This means users are more likely to recommend Windows 10 to friends or colleagues. This is a positive development, but it does not mean that Microsoft has achieved Nadella’s Windows nirvana.

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