Where Do You Want to Go Tomorrow?

Christopher Mims has five suggestions for Microsoft CEO Satya Nadella, and the second one is to forget about consumer sales:

The conventional wisdom is that nowadays, the line between consumer and enterprise IT doesn’t exist. That’s wrong, especially for Microsoft. Currently, you get 58% of your revenue and 75% of your earnings from sales to businesses.

Sometimes it’s OK to be entrenched. The power grid wouldn’t exist without General Electric, and we’re not about to move to a post-electricity world. Microsoft makes things all of us need. There’s no shame—and plenty of money—in what is essentially infrastructure.

This also means you have to stop trying to make hardware aimed at the consumer. You can’t make the “definitive” version of your devices, as if you were Apple, and still maintain an ecosystem, like Google. Most will think this wildly premature, but you should probably sell Nokia. And Xbox? There’s potential there, but it’s not the connected-home hub the company hoped for, it’s losing money and it’s a distraction. Spin it off as a separate company, and let people run with it in some new directions.

This.

A company has to play to its strengths, but making Windows dominant in the home was due more to luck than anything else. By the mid-’90s, Apple was still trying to charge premium prices for a badly out-of-date operating system on hardware which had lost its cool. And after a decade of mostly-laughable efforts, Microsoft finally had a “good enough” OS with Windows 95. Even Windows 3.1 wasn’t that bad — although on the night of Win95’s release I swore I’d kill myself if I had to spend one more minute looking at Program Manager. Yes, I was in line at Egghead Software long before midnight to get my copy of Win95 and Office 95.

And Office — always Office! — was the one thing everybody had to have at work and at home. So Windows became the default choice for desktops everywhere.

But here we are almost exactly 19 years after the release of Win95, and Apple has sucked all the profits out of the market for commodity Windows machines. And if youth buying habits are any indicator, the Mac’s market share is only going to continue increasing.

Xbox has made some profits over the years, but after discounting R&D and other expenses, the console business has been a cash drain for Redmond. Nokia is treading water at best, and is the next Motorola at worst. The time to get out and focus on core competencies is now.

I get the feeling Nadella knows this. But I don’t know how long a shadow Bill Gates and Steve Ballmer still cast over the Microsoft boardroom, and if they remain wedded to the past.