Can Nadella-Gates magic spawn another Apple?

UNITED STATES - Microsoft's new chief executive, Mr Satya Nadella, its third since it was founded 39 years ago, inherits many advantages.

He assumes the top job as the tech giant enjoys strong financials, having generated US$17 billion (S$21.6 billion) in net income in the year ended June 30 last year. It is sitting on a cash hoard of US$80 billion.

Its Windows operating system, its cash cow, still runs roughly nine out of 10 desktop and laptop computers in the world.

Yet, it has struggled to convince investors and industry observers that it can innovate and reinvent itself as smartphones and tablets dominate the landscape.

Mr Nadella's inheritance includes two precious resources, Microsoft Research and its industrial design capabilities.

Microsoft Research (MR) boasts more than 1,100 researchers and engineers, many with doctorate degrees. It is one of the largest private sector research labs globally undertaking both pure and applied research.

Its head, Dr Peter Lee, proudly explained that his staff engages in "undirected pure research, blue sky operations to understand what's happening in computer science".

He briefed a small group of journalists including this correspondent, who visited the Microsoft campus in Redmond, a leafy suburb about 30 minutes from Seattle, in November last year.

The rare glimpse into the brains of Microsoft showed the deep depth of knowledge the group has acquired since 1991 when the research division was set up.

This invaluable know-how spans the frontiers of computer science including machine learning, natural language processing and new data centre designs.

It may sound esotoric but the results have resulted in real- world benefits for Microsoft's products such as the Xbox One, launched last December.

For instance, since 1996, researchers had been working on how the brain filtered out ambient noise to focus on conversation in a noisy environment such as a cocktail party.

The research yielded several scientific papers. But it was only recently that the project captured the attention of the Xbox One development team.

The result was a tiny microphone, incorporating this technology, in the Xbox One which could recognise the voice of the gamer.

Launched last December, three million units have been sold.

Design is just as important as research, as Apple has demonstrated.

But unlike Apple, which has won kudos for its beautifully designed hardware and software, Microsoft began paying attention to design only a few years ago.

One success was the Arc Touch Mouse, a "bendable" sliver of a mouse which won the 2011 International Design Excellence Award and a Red Dot Award from Germany's Design Zentrum Nordrhein Westfalen.

Microsoft's industrial designer Young Kim went to houseware stores to look at products such as silicone oven mitts in his search to find pliable material.

The mouse is largely made up of two different pieces of silicone sandwiched together. The more flexible layer is on top and the stiffer one on the bottom so that when a user curves the mouse, the top bends without causing the layer underneath to buckle.

Microsoft today has more than 30 industrial designers.

They tinker in studios with different materials ranging from wood to silicon to metal working on product prototypes.

Then there are other user interface designers who aim to make software or services user-friendly and easily navigable.

Research and design are vital, but these efforts alone are not enough to ensure that Microsoft will thrive.

It also needs a tech visionary who instinctively knows the right time to introduce innovative products and services.

Mr Nadella has picked Microsoft co-founder Bill Gates as his tech adviser. Mr Gates has stepped down as the company chairman to give more time to help the new CEO shape technology and product direction.

Will the combination work? Since Mr Gates stepped down as CEO in 2008, he has devoted more time to philanthropy.

In the meantime, the tech industry has shifted away from PCs to mobile devices, apps, services and the cloud.

All that means, of course, that Microsoft needs, more than ever, to shift away from the declining PC market.

For this reason, Microsoft was overhauled in July last year to move away from its software legacy to transform itself into a service and device company.

It is difficult to predict how Microsoft's future is likely to unfold under Mr Nadella's leadership aided by Mr Gates, who is still held in high regard by geeks and by the wider tech industry.

One possible measure of Mr Nadella's success may be whether consumers and investors will one day mention the company in the same breath as Apple and Google when they talk about innovation.

The challenge is considerable for Indian-born Mr Nadella, whose love for the sport of Test cricket, fought over five often gruelling days, may offer a clue to his determination to win the battle for the vast consumer technology market over the long term.

chngkeg@sph.com.sg

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