About That One Billion Thing

Last week, I predicted that Microsoft would have trouble meeting its goal of getting one billion Windows 10 devices in the market within 2-to-3 years, and would likely fall short. And now, the software giant has confirmed that prediction in the strangest way possible.

Pity poor Microsoft. It dominates the traditional PC market and will no doubt rack up one billion active Windows 10 devices … at some point. But with the software giant admitting this week—for some reason—that it will not hit its stated target for Windows 10, I have questions.

Lots of questions.

I’ve also had lots of time to mull this topic over in my mind. As you may or may not know, I’m in the middle of a month-long travel nightmare right now, and I spent my Friday watching what should have been a pleasant 5 hour mid-day drive between Pennsylvania and Massachusetts turn into a 7 and a half hour disaster of stop and go traffic, while stuck behind the wheel of a six-speed VW Turbo Diesel that was polluting both the environment and sanity by the time it finally ended.

Point being, I was in no mood or ability to write about this topic last night. But if I’m being honest here, and I’m always being honest here, I find this whole thing to be disturbing.

First, the story: In an otherwise innocuous blog post, ZDNet’s Ed Bott buries the lede in epic fashion by noting, 2012 words into the 2036 word post—it is literally the last line in the post—that “although Myerson and his team are still confident about their ability to hit the 1-billion milestone, it’s unlikely to happen by 2018 as originally projected.”

Wait. What!?

Here’s what that post looks like graphically. The entire point of it comes right at the end.

Presented with this incredible cover-up after the fact, Mary Jo Foley did what credible journalists do: She asked a follow-up question and then educated her readers about the facts.

“I asked Microsoft for further clarification and received the following statement from a spokesperson,” she wrote.

Here’s the quote.

“Windows 10 is off to the hottest start in history with over 350 million monthly active devices, with record customer satisfaction and engagement. We’re pleased with our progress to date, but due to the focusing of our phone hardware business, it will take longer than FY18 for us to reach our goal of 1 billion monthly active devices. In the year ahead, we are excited about usage growth coming from commercial deployments and new devices — and increasing customer delight with Windows.”

Let’s step back for one moment. Here we are, not quite one year into a three-year schedule in which Microsoft has said it plans to get Windows 10 installed on one billion devices. And yet it already knows it will not achieve this goal? Really?

I’ve been doing the math on Windows 10 ever since Microsoft announced the goal, trying to understand how well it is doing as we move forward. I typically do so whenever the firm announces a new Windows 10 usage milestone, but because development of the Anniversary update is now winding down, I more recently wrote about my latest expectations, in Microsoft Enters Final Push for the Free Windows 10 Upgrade, less than two weeks ago.

“On the strength of 200 million new PCs for each of the next two years, Microsoft will miss its deadline, and it won’t hit the 1 billion figure until the end of 2018, about six months too late,” I wrote.

Here’s the thing. It’s the PC market—and not phones, as Microsoft and Mr. Bott claim—that is most troubling for Windows 10. The PC market is Windows’ core market, and it’s in decline, and has been for years. It will continue to be in decline for the 2-to-3 years that Microsoft allotted for that one billion device milestone.

More to the point, PCs are the only truly huge market for Windows 10, with 1.5 billion potential users. I figured this first year would be about consumer upgrades, since it was free, and that year two and three would be back to normal, a mix of business sales and PC bundles. But even if Microsoft hits 400 million active devices by July 29—a stretch—it can only hit 800 million or so units after three years, given roughly 200 million PC sales per year.

So where would that other 200 million units come from? Not from Xbox, which has accounted for just 20 million units in two and a half years. And most certainly not from phones: Even in the best three year of Nokia’s Windows phone era, they never came close to 200 million units. In fact, over the entire four year run of Lumia, Microsoft/Nokia sold only 109 million units. (And many if not most of those cannot be upgraded to Windows 10 Mobile and/or are no longer used.)

“My numbers relied on Windows Phone continuing to sell at least 50 million handsets per year for a total of 200 million or more Windows 10 Mobile devices,” Bott explained. (50 million times three is 150 million, not 200 million, so let’s assume he figured there would be 50 million upgradeable phones too.)

I’m curious where those numbers came from, given the historical sales data and trends, which are available for anyone’s perusal right out there on the Internet.

(No, Lumia isn’t the only Windows phone brand out in the world, I know. It’s just the only one that sells: Lumia accounts for 97 percent of all Windows phones in the world. So feel free to round up if you want.)

In calendar year 2014, Microsoft/Nokia sold 35.2 million units, its best-ever year for volume. In calendar year 2015, that number fell to just 27.3 million units.

If you want to look at the most recent Microsoft’s fiscal year, FY2015, which ran from July 2014 to June 2015, Microsoft/Nokia sold 36.8 million units. the highest number I could find for a 356 day range. But here’s the thing: Microsoft made its one billion prediction in April 2015, three quarters of the way through that fiscal year, and it knew how things were going at the time. It has sold fewer than 12 million phones since then (not counting the previous quarter; we don’t have those numbers yet). It only sold 2.3 million in the first quarter of 2016.

Put simply, Windows phone was never going to matter. Which is why I place it in the same category as Xbox One: Worth counting, of course, and above HoloLens, Surface Hub, and IoT. But not a big stakes player.

So why would Microsoft, and Bott, try and blame Windows phone for the shortfall?

I think it’s just a red herring.

Windows phone is the Charlie Brown of the mobile world, an easy target. It’s already in the dumps, so blaming the platform now, retroactively, is a victimless crime. You couldn’t hurt Windows phone more if you tried.

So let’s blame Windows phone for everything. It’s the reason the HoloLens field of view is so small. It’s why Edge didn’t have extensions at launch. And it’s why Microsoft was forced—forced, I tell you—to deceptively force Windows 7 and 8.1 users into upgrading to Windows 10. F@#ing Windows phone!

But seriously folks.

What I keep coming back to is Microsoft’s audacious claim that it would have one billion active Windows 10 devices in the market within two to three years. How amazing it was that the firm would make such a claim, and how Terry Myerson would put himself on the hot seat like that. I worry about the impact this will have on Microsoft and Windows—and Terry, frankly—and that this will trigger another Windows Vista-like round of timidity.

So I’ll just repeat what I already wrote.

“But know this. Regardless of the speed at which Microsoft reaches the 1 billion figure, doing so is in fact assured. As is doing so faster than with any previous Windows version. So Windows 10, by any measure, is an incredible success story. And coming as it does during a time in which PCs are in decline and Microsoft couldn’t sell a phone if its very existence depended on it, this level of uptake is all the more impressive.”

This is absolutely the case. Windows 10 is in many ways Microsoft’s best work, a thoughtful, feedback-driven love letter to its users and fans, a release that neatly bridges the past and the future. For me, Windows is the center of everything I do, and I feel the highs and lows quite personally. And on that note, I feel great about Windows 10. I just wish this had been communicated better.