Microsoft's Nadella: Congratulations on 12 months of not being Steve Ballmer

Reality bites

But you don’t get something for nothing and Nadella last year sanctioned a policy of price cuts in Windows licensing to drive the update of cheap Windows devices to feed that strategy of pumping data into the cloud and selling more subscriptions.

He sanctioned giving away Windows to machines with a screen smaller than nine inches in April 2014.

The consequence has been a huge bite taken out of Microsoft's licensing sales rump – one of its core businesses: Windows licensing fell 13 per cent last quarter. Sales of new versions of Office fell a quarter as Microsoft pushed Office 365.

The effect shocked Wall St: Microsoft’s stock fell 14 per cent the day after the news, knocking out half the gain it had made since Nadella came to office – Microsoft’s stock rose 31 per cent between February and its high point of $49.61 in November.

Nadella’s first year was easy: he simply uncorked a dam of policies that his predecessor couldn’t. It was like Barrack Obama's first few months in the White House after George W Bush left in 2008.

But Nadella’s hardest years lie ahead: shiny technology announcements mean little unless they translate into actual money.

Nadella doesn’t need plaudits from the gadget press for putting Office on iOS and Android – he needs them to make money for Microsoft’s shareholders.

On Office 365 Nadella needs more than “run-rate” – the bandwagon all industry giants are desperately jumping aboard to prove their cloud strategy is working.

Run rate isn’t real money and it can’t be relied on as proof of future success.

Office 365 subs must materially make more for today’s bottom line than the lucrative Office business that’s apparently being wilfully sacrificed.

Windows 10, the “next chapter” in Windows, must overcome serious bugs and limitations - and must quickly overtake Windows 7 as the de facto PC operating system.

Giving Windows 10 away for free for 12 months will only hurt Microsoft’s already damaged Windows licensing engine further.

Tough choices are need on strategy for getting businesses and consumers to willingly use Windows 10 – Redmond will also need to think about how and at what point to make them pay.

Nokia needs to turn into a success if Microsoft is serious about mobile phones and running Windows on those devices: Nokia is the only device maker shouldering Windows Phone, and Microsoft’s operating system is almost a market-share rounding error.

Nadella had a nice year, more or less. The coming years won’t be so kind and if the exec can’t make the kind of decisions that produce the amounts of solid cash Microsoft is used to producing, then he won’t have to many of them to put on his LinkedIn profile as CEO of Microsoft. ®