Microsoft's next CEO has 4 huge challenges to face

As rumours surrounding Microsoft’s next chief executive continue to swirl, we take a look at the four big challenges they're set to face.

1. Mobile

Microsoft’s success in mobile with Windows Phone has been mixed, on the one hand its share of sales in Europe is hovering around ten per cent, and on the other Nokia – whose handset division Microsoft has now bought – is essentially the only manufacturer supporting Windows Phone.

It’s impossible to overstate the importance of mobile and specifically smartphones. While the total installed base of PCs worldwide is around 1.6bn, smartphone’s global installed base is around 1.2bn and increasing rapidly.

Microsoft’s next chief executive will face an uphill battle persuading Samsung, Huawei and HTC to pay its Windows Phone licence fee, rather than using Google’s dominant free Android alternative.

2. Windows

Speaking of PCs, some of the largest PC manufacturers in the world like Lenovo and HP are increasingly diversifying their businesses away from traditional desktops and notebooks.

In the last week Lenovo bought IBM’s low-end server business and smartphone maker Motorola from Google in two deals worth a combined $5.2bn (£3.2bn).

These moves will worry Microsoft’s next chief executive, Windows licensing accounts for around 22 per cent of Microsoft’s revenue but fell three per cent last quarter.

3. Office

A decade ago Microsoft’s Office suite – of Word, Powerpoint, Excel, and Outlook – defined corporate work, but now its grip it weakening with revenue tumbling 24 per cent last quarter.

With the rise of smartphones and tablets, platforms that Office is largely absent on, consumers and businesses have realised that paying for Office – which can cost as much as £200 per install – is unnecessary to get work done.

While larger corporations and financial departments may be stuck using Excel and Outlook, for most consumers and small to medium sized businesses free alternatives from Google and OpenOffice are increasingly the preferred option.

4. Surface

If Windows Phone is struggling on smartphones then it’s fair to say Microsoft’s Surface strategy has been a complete flop.

Despite a shaky start in July last year with a $900m write down on its unsold inventory of Surface RT tablets, Microsoft has made strides to get its own-brand tablet strategy back on track.

The release of the Surface 2 and Surface 2 Pro – which the company said sold double the number of the original Surface – generated revenue of $893m last quarter, but are still overshadowed by Apple and Samsung in both sales and revenue.

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