- Microsoft recently announced that Windows 10 has been installed on 200 million devices.
- The healthy adoption has taken many die-hard Microsoft skeptics by surprise and proves that Windows OS remains as popular as ever in the cloud age.
- What does this mean for Microsoft and Microsoft stock?
Microsoft (NASDAQ:MSFT) has announced that Windows 10 has been installed on 200 million devices six months after its launch, making it Microsoft’s OS with the fastest adoption rate in history. Just two months ago, Microsoft said that 110 million devices were powered by the OS. The tipping point appears to have been Black Friday since 40% of the current total number of downloads have been done since then. But perhaps the best part of the success story is that three quarters of Microsoft enterprise customers are currently testing the new OS. Consumers who have installed Windows 7 and Windows 8 get a free Windows 10 upgrade while most enterprise customers will have to pay for the upgrade.
Microsoft’s hardware such as Xbox gaming console are playing a big part in the healthy adoption of Windows 10. The consoles have been flying of the shelves lately. Then there is Facebook’s much awaited Oculus Rift VR headset which will ship with native Windows 10 support while not supporting Mac OS.
Weaning Itself Off Windows
Windows 10, which Microsoft describes as having the best of both Windows 7 and Windows 10 features, has brought back the popular Start Menu that Windows 8 had done away with and has been receiving much more favorable reviews than its predecessor.
But investors might wonder: if Microsoft is mostly giving away the OS for free, how is it a good thing for the company when more people install the OS? After all, Windows OS is to Microsoft what the iPhone is to Apple (NASDAQ:AAPL). Microsoft earnings declined 43% during the previous year primarily due to lower Windows revenue. During the last quarter, Microsoft revenue declined 6.5% due to same reason.
But as Microsoft demonstrated during the latest investor event, the company can realize much more revenue for a single Windows 10 upgrade cycle compared to Microsoft’s older operating systems. Microsoft wants to build a huge Windows 10 userbase so that it can get a good chance to cross-sell its other cloud services including Office 365, Azure, Xbox Live. Skype, MSN, OneDrive, and others. Microsoft might also decide to charge for future Windows 10 upgrades.
By getting as many Windows users as possible to migrate to Windows 10, Microsoft will be able to cut on support costs for older operating systems. The company spends quite a lot of money supporting these OSes, which adds up to an unnecessary drain on its resources.
Microsoft is working to increase the entry points through which people can use its services. For instance, Microsoft plans to soon launch iPhone Pro, an iPhone that runs various Microsoft apps including PowerPoint, Word, and OneNote. This way, Microsoft can still make money when people use rival hardware. The company is also reducing its reliance on the PC division to drive its revenue.
Ultimately the rapid adoption of Windows 10 proves that Windows will most likely remain the most important PC operating system for a long time. Some industry observers had feared that Microsoft would lose its grip on the PC as it transitions to a cloud company. Windows operating systems combined command an overwhelming 90% of PC operating systems, dwarfing rival operating system such as Mac OS and Linux. The PC might be on a decline, but all that talk about the PC dying really is a big exaggeration. The PC remains a hugely dominant platform with more than 1 billion active PCs around the world, making it the second most important computing platform after the mobile phone. The PC market is worth $200B every year. And if you live in the real world, you likely see PCs in use everywhere, whether in the office or home setting. You might not be aware of this but PC gaming is more prevalent than gaming consoles. Each of those PCs requires an operating system, and Microsoft will continue to capitalize on this opportunity.
Takeaway For Microsoft Stock
Windows 10 is enjoying phenomenal growth, which plays into Microsoft’s game plan of getting as many people as possible using the OS so that the company can easily monetize its numerous cloud services. There is a good possibility that more than half of Windows users will be on Windows 10 two or three years from now, which will greatly accelerate Microsoft’s cloud transition and give plenty of upside to the Microsoft stock price.