When Satya Nadella was named just the third CEO in Microsoft's (NASDAQ:MSFT) long history in February, he made it clear that he did not exactly share former chief Steve Ballmer's vision for the tech juggernaut to become a "devices and services" company. As Nadella said in a press release announcing his new role, "The opportunity ahead for Microsoft is vast, but to seize it, we must focus clearly, move faster and continue to transform."
Nadella has since clarified the transformation he envisioned for Microsoft with his oft-repeated mantra, "cloud first, mobile first." As highlighted in Microsoft's recently completed fiscal 2014 fourth quarter, Nadella's emphasis on driving cloud revenue certainly seems to be working.
With an annual run rate of over $4.4 billion in revenue, it could be argued that Microsoft is leading the way in the burgeoning cloud market. Making a dent in the highly competitive world of mobile technologies, however, has been more challenging. One problem Microsoft has faced in this space is its lack of downloadable apps: a critical piece of the mobile pie, as longtime nemesis Apple (NASDAQ:AAPL) knows well.
Now Microsoft wants in the app download game, and it just released an updated set of tools designed to make the process easy for developers.
An answer to Microsoft's app shortage
The primary way for Microsoft to address its app shortage is to get app developers on board. One strategy to achieve this would be to continue to grow Windows and Phone mobile market share, and to make the development process as easy as possible. The first step, growing market share, is and will continue to be a work in progress. But Microsoft's recent release of several updates specifically for developers should make the app development process easier.
The first update is to Visual Studio 2013, Microsoft's complete set of tools for mobile desktop, and Web development. The next update is a software development kit for Microsoft's cloud platform, Azure, to use as a platform for developing and testing apps.
The next two updates specifically address the shortage of mobile apps Microsoft offers Windows customers. To give you an idea, nine of the top 10 app downloads from Apple's App Store are not available on Windows Phone. Microsoft hopes its Windows Phone 8.1 update for developers will help fix the shortage by making it easier to develop and test apps specifically for Windows.
However, Nadella knows ignoring iOS and Android isn't a viable option, which is why Microsoft this week released a preview of what it calls the Multi-Device Hybrid Apps CT 2.0. This tool gives developers the ability to build and test apps in any of the big three operating systems -- iOS, Android, and Windows -- and now supports older systems, including Windows 7 and early Android versions.
Why it matters for Microsoft
Google, with its huge Android OS market share, accounts for 75% of the market in downloaded apps for mobile devices, but Apple enjoys a huge edge in revenue.
Last year alone, users of Apple's app store spent over $10 billion. And it's not just the revenue directly attributable to app downloads that matters for a mobile upstart like Microsoft. Microsoft Windows and Windows Phone users have long grumbled about the lack of available applications; as any smartphone or tablet owner will tell you, a wide selection of available apps plays an important role in determining which device a user settles on.
If Apple's app download results are any indication, and as the leader in revenue it's safe to say they are, the market for apps is getting even bigger. Though Apple didn't share specifics, it said recently that July was its biggest month ever for the number of apps customers and the amount of revenue generated.
According to a recent report from eMarketer, nearly 70% of all smartphone users view their free apps during the course of a month, and 57% play games.
Final Foolish thoughts
It appears Nadella's vision of Microsoft as a cloud-first, mobile-first entity is taking hold. Cloud revenue is growing exponentially, and with these new development tools, Microsoft hopes to address some of its mobile shortcomings.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), 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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