He'll never, ever say this in public but Microsoft CEO Satya Nadella is out to kill Windows.
OK, not literally.
But parsing Nadella-speak for clues, a close reading of his words and deeds as CEO speaks volumes about his intentions to recast Microsoft as a company for a post-Windows world and reduce sharply its reliance on PCs.
As the company prepares to announce its fiscal fourth-quarter earnings on Tuesday, analysts and industry executives are paying close attention to Nadella's effort to focus Microsoft more on software platforms such as the cloud and on productivity toolkits as part of a broader devices and services strategy. Even if that means pushing Windows into the back seat.
After all, it's not just a Windows vs. Mac or Windows vs. Linux world any more. The smashing success of smartphones and tablets means also factoring in the powerhouses that are Android and iOS. Sadly for Microsoft, its Windows Phone efforts haven't helped much in that regard.
We may hear more about that new focus from Nadella after the numbers get released. The company is expected to earn $2.69 per share for its fiscal fourth quarter, according to the consensus estimate of analysts surveyed by Thomson Reuters. Barring the completely unexpected, Wall Street expects to see more growth in cloud services and its hardware business.
Management may also share further details about its restructuring plans following last week's announcement of up to 18,000 planned cuts. The layoffs will affect areas where overlaps now exist due to Microsoft's controversial acquisition of Nokia's handset business acquired this year. That deal still remains an unpopular acquisition with many on Wall Street.
"We think investors would like to hear why the company is in this business to begin with," is how longtime Microsoft watcher Rick Sherlund of Nomura Securities put it in a research note Monday morning.
CFO Amy Hood, a Goldman Sachs alum who speaks Wall Street's language, ought to be able to defuse any worries on that front as well as handle concerns about any financial impact caused by the transition of Office from the desktop to the cloud. The more interesting news is whether Nadella starts talking specifics about turning his vision for Microsoft into a reality.
"Satya's done some very significant restructuring and strategy changes and that's important. It's been a long time coming," said Forrester analyst Ted Schadler. "So the low-hanging fruit is there in terms of getting the organization with the right structure and also focused on doing the right things."
In his public statements and email missives since replacing Steve Ballmer as CEO in February, Nadella has repeatedly discussed his intention to transform Microsoft's corporate culture and prepare the company to compete in what he describes as a "mobile-first, cloud-first" world. The message has resonated on Wall Street. Even before Microsoft appointed Nadella CEO in February, the stock had started to climb in anticipation of a change and now trades around its 14-year high. Whether that trend continues depends on Nadella's success engineering what would be a sharp break with Microsoft's past.
"The strategy is at a level above Windows and Windows has to shape up and fit in," said a former senior Microsoft executive, describing the pace of the emerging Nadella era.
That's hardly hyperbole. Consider the 3,100-word memo that Nadella sent to employees recently. It essentially was an expanded rehash of themes he's sounded since taking over. It covered everything imaginable yet somehow managed to avoid any in-depth discussion of Windows. Yes, there was a perfunctory nod to Microsoft's commitment to make Windows "the most secure, manageable and capable OS for the needs of a modern workforce and IT." But this was a revealing document.
For the company's first two CEOs, Bill Gates and Steve Ballmer, Windows was the equivalent of the air that Microsoft breathed. Four words summed up the bedrock assumption that drove nearly every big management decision at Microsoft since the late 1980s: protect the Windows franchise.
Windows may still be primus inter pares at Nadella's Microsoft -- at least for now -- but the new boss is out to recast the company in what's fast becoming a post-Windows future. Desktop operating systems no longer dominate the computing world and Nadella knows it would be fatal to anchor Microsoft's future to Microsoft's past. Instead, he wants the company to pivot around the concept of productivity where mobile computing and the cloud are what matter most.
"The cloud orchestrates it, but without mobile end points, be they sensors or mobile devices, you're not going to have the impact in the world and people's lives," Nadella told a group of Microsoft business partners in Washington, D.C., last week, his latest stump speech explaining how the tech world is shifting from the old world of Windows to a new world in which mobility and cloud services proliferate.
Kick-starting the bureaucracy
Nadella has promised to streamline the bureaucracy and speed up decision-making. That can't come soon enough for Jonathan Hill, who is the associate dean of Pace University's Seidenberg School of Computer Science and Information Systems in New York.
"They have gone from being a leader to being an afterthought," said Hill. "Good graduate students are telling us that the Microsoft product line was not what they were looking for to get experience in. When it comes to Microsoft, there isn't much top-of-mind awareness."
That's not a promising harbinger and Nadella's sense of urgency comes just his chief operating officer, Kevin Turner, noted publicly that when you count in smartphones along with tablets and PCs, Microsoft's collective market share for operating systems is 14 percent. Fourteen percent. In contrast, Microsoft's desktop market share for Windows is around 90 percent.
"The reality is, the world's shifted, the world's evolved," Turner said.