Microsoft 2010 Year in Review: Smartphones, the Cloud, Tablets

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Over the past several years, Microsoft has conditioned its audience to expect the company to debut its latest big thing at the Consumer Electronics Show (CES) in Las Vegas the first week of January.

For instance, during his keynote at CES 2010, Microsoft (NASDAQ: MSFT) CEO Steve Ballmer showed off a Windows 7-based slate computer from HP that shipped to enterprise customers in late October.

However, the move to steal attention from the then-pending Apple (NASDAQ: AAPL) iPad didn’t pick up much momentum through most of the year. After telling financial analysts in late July that tablet computers are Microsoft’s “job one,” it turns out that it won’t have a presencein that market until well into 2011, when the devices are readily available. Sales of iPads, in contrast, exploded when Apple began taking pre-orders in mid-March.

Now rumors are circulating again that Ballmer will show a “slew” of Windows 7 slatesat CES 2011 in two weeks — granted that much of the delay has to do with a new line of power-saving chips, codenamed Oak Trail, coming from Intel (NASDAQ: INTC) early next year.

Microsoft did somewhat better in the smartphone arena. At Mobile World Congress 2010 in Barcelona, Spain in February, Ballmer introduced Windows Phone 7, its challenger to the iPhone and Google (NASDAQ: GOOG) Android.

Ballmer said then that Windows Phone 7 handsets would be available in time for the 2010 holiday sales season. The phones began shipping to U.S. customers on Nov. 8 and six weeks later on Dec. 21, Microsoft announced that 1.5 million handsetshad been “sold.” However, the company made clear that figure represents sales between phone manufacturers and wireless carriers, not actually sales to end users.

In March, Ballmer also said the company is “all in” with cloud services — something that’s been underway for five or six years now — since the advent of the company’s “software-plus-services” initiative aimed at keeping the PC and Windows and Office relevant to users while providing subscription-based services in the cloud. That may be the biggest legacy left by Ray Ozzie who announced in October he was leaving his role as Microsoft’s Chief Software Architectafter four years in the post.

In fact, in June the company claimed to already have signed up 40 million paid users for its cloud-based subscription services. Many of those customers use Microsoft’s Business Productivity Online Suite (BPOS), which provides Exchange, SharePoint, Office Communications, and Live Meeting hosted in Microsoft’s giant datacenters or via third-party hosting firms.

In a related move, Microsoft shipped Office 2010, the latest iteration of its cash cow business productivity suite, in May, which includes the Office Web Apps, a Web-based competitor to Google (NASDAQ: GOOG) Docs.

Then, in October, the same week that Ozzie announced his departure, Microsoft announced that next year it will combine the Office Web Apps and Office 2010 with the latest 2010-branded versions of the servers in BPOS to create a new subscription package it has named Office 365.

But no matter where Microsoft turns these days, it seems to run into Google.

In October, Google sued the U.S. Department of the Interiorfor not considering its Google Apps online e-mail, calendaring, and collaboration tools offering before awarding a contract to provide those services to as many as 88,000 government users via Microsoft’s BPOS.

The two have been increasingly colliding in those markets.

For example, Microsoft has won several important customers recently, but so has Google.

Additionally, in late summer, Microsoft and Yahoo (NASDAQ: YHOO) completed the switchover to using Bing’s search and advertising infrastructure to support Yahoo’s services, bringing the two services a combined global search share of just under 10 percent, according to Web analytics firm Net Applications. In comparison, Net Applications estimates that Google search holds almost 85 percent of the global search market.

There is another area where Google has so far completely trounced Microsoft.

It’s the Google Android smartphone operating system, which has already been in the market for two years. Microsoft, in September, sued Motorola for patent violations in its Android-based phones. But the software giant’ emerging Windows Phone 7 devices have a tough haul to catch up in the burgeoning smartphone market.

Finally, in mid-December, Microsoft joined FairSearch.org, an organization opposed to letting Google purchase travel technology developer ITA Software— many travel sites, including Microsoft’s Bing Travel, use the acquisition target’s technologies.

One piece of good news: In October, after a year on sale, Microsoft announced it had sold 240 million Windows 7 licenses.

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals. Follow him on Twitter @stuartj1000.