Windows no longer a ‘cornerstone’ for Microsoft, as company changes how it describes its business

Microsoft CEO Satya Nadella speaks about Windows 10 in Redmond. (GeekWire File Photo)

Microsoft marked a major shift in its business with a subtle but significant change in the way it describes one of its most important goals.

The company’s 2019 Form 10-K report, made public Thursday in a U.S. Securities and Exchange Commission filing, removes a longstanding reference that described Windows 10 as “the cornerstone” of its ambition to make computing more personal.

It’s the latest signal that Microsoft has evolved beyond the flagship operating system that transformed the company into a tech juggernaut and fueled the rise of the personal computer industry. Windows remains one of Microsoft’s biggest products, used by hundreds of millions of people around the world, but more than five years into Satya Nadella’s tenure as CEO, it’s no longer the company’s primary growth engine.

Numbers reported elsewhere in the annual filing make this point clear.

The filing includes a breakdown of Microsoft revenue by major product lines, which is different from the broader divisional results in the company’s quarterly earnings results. This alternative view of the numbers shows that Windows is growing at a slower pace than any of the company’s other big businesses. Windows posted revenue gain of 4 percent in 2019, to $20.4 billion for the year. That compares to double-digit percentage growth in many past years.

By comparison, the company’s booming server and cloud services business grew by 24 percent to $32 billion, surpassing Office to become Microsoft’s largest product line by revenue for the first time. This confirms a milestone that was also reflected in the company’s fiscal year-end earnings report. This ability to find a new source of growth is one of the main reasons Microsoft has climbed back to the top as the most valuable company in the world.

Appropriately enough, GeekWire identified the change in the boilerplate 10-K language using the “Compare Docs” feature in Microsoft Office, automatically highlighting language that has changed between different versions of documents. (This is also how we discovered last year that Microsoft added Slack to its official list of competitors.)

This is the key sentence that was included in the 10-K for the past several years in some form: “Windows 10 is the cornerstone of our ambition, providing a foundation for the secure, modern workplace, and designed to foster innovation through rich and consistent experiences across the range of existing devices and entirely new device categories.”

That strong endorsement of the operating system was replaced with language that puts Windows in the context of a larger strategy. Here’s the section as it reads now.

We strive to make computing more personal by putting users at the core of the experience, enabling them to interact with technology in more intuitive, engaging, and dynamic ways. In support of this, we are bringing Office, Windows, and devices together for an enhanced and more cohesive customer experience.

Windows 10 continues to gain traction in the enterprise as the most secure and productive operating system. It empowers people with AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive 3D content storytelling, and mixed reality experiences. Windows also plays a critical role in fueling our cloud business and Microsoft 365 strategy, and it powers the growing range of devices on the “intelligent edge.” Our ambition for Windows 10 monetization opportunities includes gaming, services, subscriptions, and search advertising.

Microsoft didn’t provide a comment in response to a GeekWire inquiry.

Last year, Microsoft embarked on a major reorganization of its engineering teams that put Windows on the back burner somewhat by splitting it among two major groups, putting a greater emphasis on cloud computing. The move also coincided with the departure of Windows Chief Terry Myerson.

Microsoft had huge hopes for Windows 10, predicting in 2015 that the operating system would be on 1 billion devices within a couple years. That didn’t end up happening, and Microsoft revised its goals downward. However, to keep things in perspective, Windows 10 is still on 800 million devices, per the company’s latest update in March.