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Microsoft Corporation's Windows 10 Adoption Slows

By Evan Niu, CFA – Sep 28, 2016 at 1:03PM

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Well, what did you expect after the free upgrade offer ended?

Image source: Microsoft.

Earlier this week, Microsoft (MSFT 3.05%) said that there are now 400 million devices running Windows 10. That includes a wide variety of gadgets, including PCs, tablets, smartphones, Xbox Ones, and more. This is both good news and bad news.

The good

The milestone itself is an accomplishment, considering Windows 10 launched just over a year ago. Windows 10 is such an important product for Microsoft, as it represents a shot at redemption over the Windows 8 debacle, while also testing out new revenue models for the ubiquitous software company.

Image source: Microsoft.

Hitting 400 million shows continued progress for Microsoft's goal of getting Windows 10 on 1 billion active devices. The company was originally hoping to cross that threshold by 2018, but had to recently walk back its projections. Microsoft now expects it to take longer than 2018 to reach 1 billion devices.

The bad

Unfortunately, 400 million also shows that adoption is slowing. That's just 50 million more than the 350 million devices that were running Windows 10 in June, which was 50 million more than the 300 million devices that were running Windows 10 in May.

This isn't unexpected, however. Microsoft generously had a free upgrade offer that allowed most users to get the latest and greatest version of the operating system at no cost for the first year following Windows 10's launch last year. Naturally, a great deal of people took Microsoft up on this offer, which stopped at the end of July. Of course adoption would slow once the free offer went away.

But now the real test begins for Microsoft to continue growing Windows 10 installations. Windows 10 Home costs $120 if you buy it separately to upgrade or install on a PC.

Some of Microsoft's early hopes were inevitably predicated on Windows Phone, but it has become increasingly obvious that Microsoft isn't focusing on the smartphone industry much anymore (at least in terms of hardware or operating system share). That's a tough pill to swallow, and is likely a contributing factor for why Microsoft probably won't hit 1 billion devices until around 2020 or so.

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of 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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