Mark your calendars, tech investors -- Microsoft (NASDAQ:MSFT) will host a live online event called "Windows 10: The Next Chapter" on Jan. 21 to reveal more details about its upcoming operating system.
Back in early October, Microsoft released the first public preview of Windows 10 for enterprise users. During the January event, Microsoft is expected to discuss and release the consumer preview. The entire technical preview will end on April 15 and lead into Microsoft's annual Build developer conference, where the company will likely announce the final release date for Windows 10.
Let's look at three key things Microsoft investors should look for when the "next chapter" arrives in January.
1. Pricing strategy
Microsoft milked its cash cows of Windows and Office for years. But that plan was eventually disrupted by the arrival of free SaaS (software as a service) alternatives, like Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Chrome OS and Drive, and existing users sticking with older versions that they deemed "good enough."
Windows 8 and Windows 8.1 are currently installed on about 18.7% of the world's PCs, according to Net Market Share. By comparison, 56.4% are sticking with Windows 7 and 13.6% are still clinging to Windows XP. Last October, Forrester Research said that 28% of surveyed firms were still using Office 2003, compared to 22% using Office 2013.
To unite this fragmented universe, Microsoft pivoted toward the cloud. Office 365 turned Office into a subscription-based service, ensuring that upgrades locked customers into Microsoft's cloud ecosystem. Microsoft Indonesia President Andreas Diantoro stated that Windows 10 might be a free upgrade for Windows 8 users, while other reports suggest that Microsoft could extend that offer to XP and Vista users as well. Other rumors suggest that Windows 10 will initially be free, but evolve into a subscription-based service like Office 365.
A subscription-based Windows would be ideal, but it might convince users to stick with older versions or free alternatives instead. Microsoft, which has neither confirmed nor denied these reports, might offer a clearer picture of its pricing strategy in January.
2. ARM compatibility
A confusing aspect about Windows 8 was its relationship with Windows RT, which was designed for chips licensed from ARM Holdings (NASDAQ: ARMH). Microsoft launched RT because it saw that Intel (NASDAQ:INTC) and AMD's x86 chips -- for which previous versions of Windows were designed -- were marginalized in tablets by ARM-licensed ones. This caused a compatibility gap between Windows 8 and RT, which could only run Windows Store apps instead of older Windows software.
With Windows 10, Microsoft faces a similar problem. Should it go all-in on x86 chips, which have slowly returned to smartphones and tablets, or should it launch an ARM version to reach a broader mobile market?
Microsoft previously stated that an ARM-based version was in development, but the previous developer preview was only compatible with x86 devices. Since most smartphones run on ARM-licensed chips, and phones remain a key component of Microsoft's "One Windows" plan, we can assume that Windows 10 for Windows Phones will be ARM-based. But I doubt that an ARM-based version of Windows 10 will be initially launched for cheap tablets, since Microsoft is currently committed to flooding the market with low-end Windows 8.1 tablets powered by Intel Atom processors.
In January, I'd like to hear more about how Microsoft intends to resolve the divide between x86 and ARM with Windows 10, whether it be through "universal apps" or virtualization.
3. Cortana and Bing
Since the January event is expected to focus more on everyday consumers than enterprise customers, I think we'll hear much more about Cortana -- Microsoft's answer to Apple's (NASDAQ:AAPL) Siri and Google Now -- which debuted on Windows Phone 8.1 in April. Cortana will reportedly be the voice of Windows 10, but the feature was notably absent from the October preview.
Cortana is important to Microsoft because it will merge Bing and Windows Search, and will likely complement the search box near the Start Menu. Since Microsoft lacks a strong market presence in smartphones and tablets, placing Cortana front and center on Windows 10 desktops could help Microsoft strike back against Google in search.
Bing currently processes 14.3% of the world's Internet searches and 29.4% of desktop searches in America, according to Net Market Share and comScore. Google respectively controls 53.7% and 67.3% of worldwide and U.S. searches. If Bing's search engine market share rises, so will its ad revenue and ability to expand its cloud-based ecosystem.
The future of Windows
Windows traditionally accounts for around a fourth of Microsoft's top line, which makes Windows 10 its most important product launch of 2015.
Windows 10 will mark a major transition for Microsoft, since it will determine if the company can shift from the Gates/Ballmer model of occasional upgrades to a more stable cloud-based model. If Windows 10 is well-received, investors might not have to worry about users sticking with "good enough" operating systems.
But to achieve that success, Microsoft in January should give consumers and investors a clearer idea of where it is headed with pricing, support for mobile devices, and Cortana integration.