2013: Microsoft's Year in Transition


Microsoft is one of those steadfast tech companies, with little flair and typically free from drama. But that doesn't mean the company hasn't had its fair share of ups and downs this year. In fact, 2013 has been pretty significant for the Redmond, Wash. company; certainly a year full of transitions.

To better understand where Microsoft is headed in 2014, let's take a brief look at what it's accomplished (and what it hasn't) over the past 12 months.

Surface 2. Source: Microsoft.

Diving deeper into mobile
This year we saw Microsoft transition further into mobile, with the company's Windows Phone operating system overtaking BlackBerry's OS market share by shipments. As of the end of October, comScore still has Windows Phone behind BlackBerry in the U.S. based on mobile subscriber data, though. with Microsoft holding 3.2% of the market to BlackBerry's 3.6%. Whether looking at shipments or subscriber numbers, it's clear Windows Phone has become the third major player in the smartphone OS game as demand for BlackBerry devices continues to decline.

Nokia Lumia 1520. Source: Microsoft.

Microsoft has helped push its smartphone platform further by boosting the number of app offerings in its Windows Phone Store. In June. Microsoft began paying developers to build apps for Windows Phone 8 or Windows 8 platforms. The strategy paid off at least a little and the Windows Phone store now boasts more than 200,000 apps, but still falls far short of the more than 1 million apps offered by both Apple and Google.

Even more important than smartphone OS market share or apps is Microsoft's bid to buy Nokia's devices and services. In September, Microsoft announced the ppurchase of the Nokia division for $7.2 billion. The deal is all but finalized, following approval by the Department of Justice, the Federal Trade Commission, European Commission, and Nokia shareholders.

Microsoft is basically going it alone with its Windows Phone OS, so buying up Nokia's devices, which include the Lumia line of Windows Phones, makes a lot of sense. When the deal closes, Microsoft will also gain access to Nokia's patent and mapping licenses.

Dragging RT along
Microsoft's longtime core product, Windows 8, got an update this year, bringing back the start button and other minor changes. As of November, Windows 8 and 8.1 make up about 9.3% of all Windows OS market share. Windows 7 dominates, with 46.6%, according to Net Applications data.

Despite missing some consumer expectations for Windows 8 and 8.1, the real thorn in Microsoft's side this year has been the Windows RT OS. Back in July, Microsoft had to write down $900 million for an "inventory adjustment" on its unsold Surface RT tablets. The loss was the biggest indicator that Windows RT hasn't been a hit with consumers. Device makers seem to agree with the public: Samsung, Lenovo, and Dell all stopped making RT tablets, leaving just Microsoft and Nokia keeping RT alive. Microsoft decided to keep RT around when it launched the Surface 2 back in September, but has admitted that at least the branding of RT has confused consumers.

Source: Microsoft.

Changing of the guard
One the biggest developments for Microsoft this year was CEO Steve Ballmer's announcement in August that he'd leave Microsoft within 12 months. This came just one month after Ballmer announced the "One Microsoft" restructuring plan to better position the company in the fast-paced tech industry.

Since the retirement news, there's been no shortage of coverage and speculation regarding Ballmer's successor. But Microsoft hasn't officially announced anything yet, except that the search will push into 2014. Considering the size and influence of Microsoft in the tech space, and the fact that the company has only had two CEOs in its 38-year history, it's no surprise the board is taking its time to find the right leader.

Microsoft investors have enjoyed gains of more than 30% year to date, and though Microsoft has struggled through some of its bigger transitions in mobile and Windows platforms, there's still lots of life in the company. A new CEO in 2014, coupled with a focus on mobile devices and services, could bring a stronger Microsoft next year.

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The article 2013: Microsoft's Year in Transition originally appeared on Fool.com.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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