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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →In December 2009, CIO identified four challenges Microsoft would face in 2010: catching up in mobile, sustaining Windows 7’s momentum, defending Office against web-based alternatives, and growing Bing. The article was a forecast, not a verdict on how the year turned out. Microsoft’s later fiscal 2010 reporting showed strong Windows 7 sales and record company revenue, while its announcements and results offer a way to distinguish the risks it faced from the outcomes it later reported.
Why 2010 looked like a rebuilding year for Microsoft
CIO framed 2010 as a rebuilding year after a difficult 2009, with Microsoft’s scale making it exposed to the economic downturn. But the company’s fiscal 2010 results complicate a simple story of decline: Microsoft reported record revenue of $62.5 billion and operating income of $24.1 billion in its annual report. Those are company-reported fiscal-year results, not evidence that each product challenge had been resolved.
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The four issues were connected by a larger strategic shift. Microsoft had established businesses built around desktop software and enterprise products such as Office, Exchange, and SharePoint, while competitors were gaining attention through mobile platforms, browser-based services, and search. Microsoft was also investing in cloud services: in its fiscal 2010 annual report, it said it spent $8.7 billion on research and development, most of it devoted to cloud technologies; roughly 70 percent of its 40,000 engineers worked on cloud-related products and services; and more than 10,000 corporate customers had adopted Windows Azure. These figures describe Microsoft’s own report of its fiscal-year efforts, rather than independent measures of cloud-market leadership.
1. Mobile: could Microsoft keep customers in a changing market?
The mobile challenge was about more than putting a new operating system on a phone. CIO said Windows Mobile 6.5 had received harsh reviews and described Microsoft as struggling to keep pace with the iPhone, BlackBerry, Palm, and Android. Its question was practical: “How do you win over and keep customers when there are so many established and well-regarded choices?”
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Industry analyst Roger Kay, quoted by CIO, warned: “If Microsoft delays much longer on producing a decent mobile platform with software, services and partners, then it will be out of the game.” That was Kay’s assessment, not a statement from Microsoft.
Microsoft’s announced response
At Mobile World Congress in February 2010, Microsoft presented Windows Phone 7 as a new, integrated platform intended to bring a more consistent design to hardware, software, and services. The company said it would work with handset makers and mobile operators, and that phones were planned to reach the market for the 2010 holiday season. Steve Ballmer described the broader approach as “three screens and a cloud,” naming the phone, PC, and TV. This was a product and partner strategy announcement; it did not by itself establish whether Microsoft would regain market momentum.
2. Windows 7: sustaining launch momentum through a downturn
CIO viewed Windows 7 as a successful launch with positive early reception, but warned that Microsoft needed to keep marketing it while consumers and businesses were cautious about spending. The article also pointed to competition from Apple’s advertising and cited a Gartner forecast of modest PC-market gains. That was a forecast at the time, not a report of what the market ultimately did.
Microsoft’s fiscal 2010 annual report later said Windows 7 had sold 175 million copies. The company called it the fastest-selling operating system in history; both the sales figure and the superlative are Microsoft’s own reporting and characterization. The reported sales indicate that the launch had substantial reach, but they do not erase the uncertainty about how spending conditions and competition would shape demand in 2010.
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3. Office: would web apps change business preferences?
CIO saw Google Apps as a growing consumer alternative and raised the possibility that greater comfort with cloud services would reduce businesses’ reluctance to store data online. At the same time, it noted that businesses still largely preferred Microsoft desktop tools and commonly relied on Exchange. The challenge was therefore not simply whether a browser could open a document; it was whether web delivery could alter established workplace habits and trust in hosted data.
Microsoft’s desktop-and-web counter
Microsoft’s answer included Office 2010 and Office Web Apps, pitched as a way to work across a PC, phone, and browser. In its fiscal 2010 annual report, Microsoft said Office 2010 had been downloaded by more than 9 million beta customers before its official launch. That figure refers to beta downloads, not unique paying customers.
Cloud security and privacy were part of the adoption question. In a January 2010 blog post, Microsoft executive Brad Smith cited a Microsoft-commissioned poll in which 90 percent of the general population and senior business leaders were concerned about the security and privacy of personal data stored in the cloud. The figure is Microsoft’s account of its commissioned poll; the available report does not independently establish the poll’s methodology.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.4. Bing: turning search share into scale and advertising
CIO said Bing needed to gain market share and advertising revenue. It reported that Bing had a 9.9 percent share of the U.S. search market in October 2009, citing comScore. The geography, month, and attribution matter: this is not a worldwide figure or a current market-share measure.
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Microsoft saw its planned search integration with Yahoo as a way to increase scale. In February 2010, the company argued that search engines benefit from network effects because algorithms learn from user interactions, potentially making it harder for lower-volume engines to match relevance on uncommon queries. Microsoft’s claim that combining Yahoo’s and its own search volumes could help was an interested corporate argument in a competition debate, not a regulator’s finding.
In its fiscal 2010 annual report, Microsoft said Bing had gained more than four points of share during that fiscal year and that U.S. integration with Yahoo was expected to be completed during the same fiscal year. These statements use a different time period and source framing from CIO’s October 2009 statistic, so they should not be treated as directly comparable measurements.
What the four challenges reveal about Microsoft’s choices
Across the four areas, Microsoft was trying to protect established positions while adapting to business models and distribution channels that were changing. Windows 7 and Office relied on products with substantial existing use; mobile required a credible platform and partners; and Bing needed search volume that could support both relevance and advertising. Cloud services cut across these efforts, linking devices and software while introducing questions about adoption, data security, and privacy.
That combination explains why the 2009 forecast should not be read as a prediction of imminent corporate collapse. Microsoft entered 2010 with significant enterprise businesses and a major software launch, but it also faced execution risks in mobile, changing expectations for productivity software, and the challenge of building scale in search. Its later annual report documents company-reported sales, investments, and adoption—not a guarantee that every strategic bet had succeeded.
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