What Might 2014 Hold for Microsoft?

While this year has been full of transitions for Microsoft  (NASDAQ: MSFT  ) , the company is moving into 2014 with a lot of new opportunities -- and some major challenges as well.

Source: Microsoft.

A new perspective
Microsoft CEO Steve Ballmer announced in August he'd be stepping down within 12 months. It was a huge announcement not just because Microsoft is one of the world's largest tech companies, but also because Ballmer is one of only two CEOs the company has ever had (the other being some guy named Bill).

John Thompson, a member of Microsoft's board of directors, said this month that the company is close to finding its new CEO, but that the decision won't come until "the early part of 2014."

Ballmer's resignation brings not just a new chief decision maker to the company, but also the opportunity for a new perspective. A month before Ballmer said he was leaving the company, he restructured its divisions in an effort to make Microsoft compete better with its tech rivals. That was a positive first step in moving the Redmond tech giant into a new "devices and services" era. But a new CEO will likely take it even further in 2014 as Microsoft closes on the purchase of Nokia's devices and services.

A match made in necessity
Microsoft is expected to officially complete the $7.2 billion Nokia deal toward the beginning of 2014. It's yet another step toward the company competing directly with Apple, Samsung, and Google in the mobile hardware and software space.

In an interview with ZDNet this month, Ballmer said the company needs to "upgrade and improve, and that's part of the Nokia acquisition."

Windows Phone OS. Source: Microsoft.

In order to take on Microsoft's biggest competitors next year, the company will need to successfully integrate Nokia's devices and services -- and about 32,000 employees -- into its overall strategy. Microsoft's move to dive further into making and selling its own devices may continue to make original equipment manufacturers and former partners a bit uneasy, but it'll be even more of a necessity in 2014.

Here's why: At the end of October, Apple held the top spot for U.S. smartphone subscriber market share for OEMs with 40.6%. Samsung took the second spot with 25.4%, and Google's Motorola stood in third with 6.9%, according to comScore data.

When it comes to U.S. smartphone OS share, Android had 52.2%, iOS held 40.6%, and Windows Phone came in the No. 4 spot with just 3.2%.

To be fair, the Windows Phone is doing well in some international markets. Its market share in Great Britain was 11.9% at the end of October, and 12.5% in France. But the most lucrative smartphone markets -- like the U.S. -- clearly need to be a focus next year and beyond.

Microsoft's tablet pursuits are also a big area to watch in 2014. The Surface Pro and Surface RT didn't break any sales records in 2013, and the company had a $900 million inventory adjustment on unsold RT tablets over the summer. But with the Surface 2 and Surface Pro 2 launch in September, Microsoft made some tweaks to the devices, which will hopefully make them more appealing to consumers. The company recently admitted that the Windows RT branding was confusing to users, and it might be wise to consider ditching the OS altogether next year.

Though this past year hasn't been an easy one, Microsoft is looking at a 2014 with even more changes and more possibilities for growth. With a new CEO and more devices and services at its fingertips, the company may be able to capitalize on the moment and make 2014 a year of complete transformation.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 22, 2013, at 2:30 PM, symbolset wrote:

    PC OEMs are looking rather wistfully at the Christmas tree this season. Windows 8.1 didn't save their Christmas. As they look forward to the new year comes the news: Windows 9 isn't coming until 2015, so it won't save next Christmas either. They face an entire 2014 with no hope of rescue from Redmond.

    However will they fill their days in the meantime, waiting for a Santa they already know isn't coming?

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