After a quiet year, is Microsoft ready to wake up, or settle down?

Microsoft CEO Satya Nadella
Microsoft finished 2016 strong, riding high on the strength of several initiatives that had us convinced that it was maintaining the PC’s place at the top of the technology mountain. By the end of 2017, Microsoft was riding high again — or at least the company’s stock price was.

Even so, the company’s perception in the market is decidedly mixed as we enter into 2018. So let’s take a look back at a year that was relatively muted for the PC market’s most dominant force, to answer this question: where will Microsoft go in 2018?

Has Surface matured, or is the best still to come?

In 2015, it was the original Surface Book (along with Windows 10 itself) that mesmerized the market with its screen that rips off of a traditional clamshell notebook base. Microsoft wowed audiences again in 2016 with the stirring introduction of the Surface Studio, the most innovative desktop of the year (and maybe the decade).

Microsoft’s perception in the market is decidedly mixed as we enter into 2018.

In 2017, Microsoft was far more conservative. Its new, major piece of hardware was the Surface Laptop, a well-built clamshell notebook that has some attractive design features — but nothing that stands out as terribly innovative. Unlike the Surface Pro, Surface Book, and Surface Studio, the Surface Laptop didn’t redefine or expand the possibilities of its given form factor. Instead, it fit nicely into an already-crowded segment and included a poorly-explained and execution of Windows 10 S that still doesn’t make much sense.

Everything else we saw from Microsoft in 2017 was a refinement on the products that have become staples in the Surface lineup. The first was the Surface Pro, the evolutionary fifth-generation model of Microsoft’s excellent and mature detachable tablet. While it looked nearly identical to the its predecessor (the Surface Pro 4), it was made even better in terms of performance and battery life. It’s become such a recommendable device that we even named it our computing product of the year for 2017.

And then at the tail end of the year, the Surface Book 2 was introduced, which added a 15-inch model to the lineup and significantly increased its power. Again, the design was nearly identical, but refinements to the basics like performance and battery life were significant.

The amount to which Microsoft was playing it safe caused some people to doubt whether Surface had a future, and was merely retreating due to diminishing sales. The division’s leader Panos Panay quickly shot down the rumors as mere “tabloid” gossip, and that’s not surprising. The fact remains that Surface continues to achieve a very real purpose no matter how many units it sells — to keep pushing the industry forward and making sure Windows 10 has great machines to show off its best capabilities. And so far, the other PC manufacturers are responding with their own highly competitive machines.

There’s likely to be more innovation coming from Surface in 2018, such as the very real potential for a different kind of mobile “phone” device that could even bring Microsoft’s former Courier concept to life. For 2017, Surface may have merely held its own, but it could be that Microsoft is entering into a “tick-tock” release cycle that many companies follow.

Microsoft’s consumer strategy is cloudy, at best

Microsoft’s strategy, or at least those aspects that pumped up its stock value throughout 2017, was heavily related to the cloud, the enterprise, and productivity. Whether it’s Azure, LinkedIn, Office, or any of the company’s myriad business-oriented services, the news came hot and heavy throughout the year — and most if it was good. That is, except when it came to its consumer business.

Consumers are providing lukewarm welcomes to some of the areas where Microsoft continues to push forward.

For example, Microsoft killed off its Groove Music service in 2017, abdicating a service that’s important to mobile users and pushing them over to Spotify instead. Windows Mobile was finally put to bed, raising important questions about the company’s mobile future, and the Microsoft Band fitness-oriented wearable was also discontinued (even earlier, in late 2016). One might think that Microsoft’s consumer focus was becoming hazy at best.

At the same time, consumers are providing lukewarm welcomes to some of the areas where Microsoft continues to push forward. Its first Cortana-powered speaker, the Harman Kardon Invoke, hasn’t fared well against entrenched competitors like Amazon’s Alexa and Echo products and Google Home. Indeed, Microsoft partnered with Amazon to let Alexa respond to Cortana commands, which seems like a capitulation in the home digital assistant market.

Nevertheless, there are signs that consumers remain important. The Xbox One X, for example, gives some hope that Microsoft hasn’t completely left consumers behind. The new ultra-powerful console is a real tip of the hat to hardcore gamers, offering more power to the Xbox platform than ever and proving that Microsoft isn’t yet all business. Toss in the release (finally!) of the Windows Mixed Reality platform and its associated low-cost headsets, along with the continued focus in Windows 10 on creative types with the Creators Update and Fall Creators Update, and it’s obvious that Microsoft isn’t in the retreating position.

Rather than proving that Microsoft is giving up on consumers to focus exclusively on business, it’s more likely that CEO Satya Nadella is refusing fund products that aren’t paying for themselves in either revenue or contributions to pushing other products and technologies forward. In that way, Microsoft’s strategy isn’t unlike Google’s: doubling down on successes, relentlessly cutting failures, and not being afraid to experiment. As far as we can tell, this is the strategy that will continue to be played out in product releases in 2018.

2018 should be clarifying

In short, 2017 wasn’t nearly as exciting for Microsoft as the preceding 12 months. It might even be fair to say that the year was a sort of pause for the company, a chance to take a breather. Heading into 2018, things are likely to heat up a bit as some new initiatives take off and some new directions are pursued.

2018 could mark a return to the excitement we felt following the company’s incredibly innovative 2016.

Perhaps most significant on the third-party hardware side is the official rollout of the “Always Connected PC” that was just barely introduced at the tail end of 2017 by Microsoft and Qualcomm. These new long-lasting notebooks and 2-in-1s — coming first in the HP Envy x2 detachable tablet and Asus NovaGo notebook — represent the most direct response to the battery life and connectivity advantages of ARM-based smartphones and tablets, bringing ARM processors like the Snapdragon 835 to Windows 10 machines. While Microsoft has supported this new line of laptops, it’s the biggest shift in Windows PCs to occur in a while that hasn’t come directly from Microsoft. If these PCs take off, we should expect to see Microsoft respond in some way within its own product lines, most notably the Surface Pro.

We’re also expecting a bigger year for Windows 10 in 2018. In spite of receiving two major updates, Windows 10 arguably went through minimal changes in 2017. But it’s poised for a leap forward in productivity with new features like Timeline and Sets, which both promise to make Windows 10 even more conducive to getting work done in different ways. Microsoft is also expected to release a new version of its productivity suite with Office 2019, which should bring a host of new features and potentially compliance with Windows 10’s new Fluent Design aesthetic.

Finally, Microsoft could take a huge step forward in its vision of ubiquitous Windows 10 computing with the release of a dual-screen, Courier-like Surface “Phone’ device. If so, then 2018 will mark a return to the excitement we felt following the company’s incredibly innovative 2016 — making 2017 something of a gap year. With the amount of coals Microsoft has in the fire, 2018 could very well end up being its biggest year since 2015.

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