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Four reasons why 2015 was critical for Microsoft

It's been one hell of a year for Microsoft. The U.S. technology company's share price is up nearly 20 percent year-to-date with analysts saying the firm has transformed itself from a "sleeping giant" into a technology leader.

So what has Microsoft done this year to excite investors and change its image?



Microsoft Chief Executive Satya Nadella speaks at a shareholders' meeting in Bellevue, Washington.
Jason Redmond | Reuters
Microsoft Chief Executive Satya Nadella speaks at a shareholders' meeting in Bellevue, Washington.

Head in the cloud

Chief executive, Satya Nadella, has made cloud computing a clear focus through 2015, with Microsoft's Azure and Office 365 products. The business one of the company's fastest-growing areas, with revenues up 8 percent to $5.9 billion in the quarter ending September 30.

Microsoft's success in the cloud pushed Goldman Sachs to raise its price target for the stock to $57 from $45 earlier this month and upgrade it to "neutral" from "sell."

"The company has been successfully transitioning its Office-installed base to Office 365, is the no. 2 leader in cloud services behind Amazon Web Services and has shown strong operating expense discipline and capital allocation," Goldman Sachs wrote in a research note.

While Microsoft is behind Amazon's cloud division, analysts are bullish on the potential for the Redmond, WA-based company to be a big player in 2016.

"We continue to believe 2016 will be a '206 area code street battle for the cloud,' with Microsoft firmly best positioned as the vendor to compete with AWS on the enterprise cloud front for years to come," FBR Capital Markets wrote in a note this week.

Windows 10

After widespread criticism of Window 8, Microsoft's new Windows 10 operating system (OS) impressed analysts.

Key features include "Universal Apps," which allows developers to create one app and get it to run across different devices without the need to tinker the code much. There's also a new web browser called Edge, plus Microsoft's version of Siri — called Cortana — is now available on desktop.

In October, the company said that Windows 10 had been installed on more than 110 million devices since its launch on July 29.



Shift in mobile strategy

It's been a rocky year for mobile for Microsoft. Windows Phone is forecast to hold just 2.2 percent of the overall smartphone market this year, according to IDC, a market research company.

Microsoft has decided to slash 18,000 jobs, with many of the layoffs coming from the handset division recently acquired from Nokia.

The company has also released the Lumia 950 and 950 XL flagship phones, which met with limited success.

"Microsoft is accustomed to being the dominant player in PC and suddenly in 2015, they have realized they have lost in smartphones and they have pivoted their strategy dramatically," Ian Fogg, head of mobile at IHS, told CNBC.

The new strategy has seen Microsoft open its once-closed software such as Office to iPhone and Android users, realizing that it can win by getting its software onto the mass of devices, rather than trying to compete on hardware market share.

Visitors look at Windows-enabled smartphones, including the Nokia Lumia series, at the Microsoft stand at the 2015 CeBIT trade fair on March 16, 2015 in Hanover, Germany.
Getty Images
Visitors look at Windows-enabled smartphones, including the Nokia Lumia series, at the Microsoft stand at the 2015 CeBIT trade fair on March 16, 2015 in Hanover, Germany.

HoloLens headset

One of the most surprising hardware releases this year was HoloLens, Microsoft's augmented reality headset, which projects holographs onto the real world.

While still in its early stages, Microsoft announced plans to send HoloLens into space to help astronauts at the International Space Station. It also signed a deal with Volvo Cars to use the headset in its showroom.

The device's launch was important as it showed Microsoft is still innovative, analysts said.

"It's important as brand positioning to show Microsoft isn't a sleeping giant but is a company that is tech leader that can be spoken about in the same breath as Apple, Google and Facebook," Fogg said.