Microsoft Says Windows 10 User Goal Won't Be Met

Microsoft Corp. won't hit its target of one billion Windows 10 devices in use by June 2018, the company said Friday. It blamed the shift on its decision to scale back from the business of making smartphones that would have run Windows 10. It didn't propose a new date for meeting the one billion benchmark.

"We're pleased with our progress to date, but due to the focusing of our phone hardware business, it will take longer than [the end of June in 2018] for us to reach our goal of one billion monthly active devices," the company said in a statement.

The company set that goal just before launching the latest version of its flagship operating system last summer.

In May, Microsoft said it would lay off 1,850 workers and take a charge of about $950 million in its smartphone business. Those steps were part of dismantling the 2014 acquisition of Nokia Corp.'s handset business, a move intended to secure Microsoft's position in the phone market that never materialized.

Nonetheless, Windows 10 uptake has moved at a record pace relative to earlier versions. In June, Microsoft said that more than 350 million devices ran the operating system. Adoption climbed 16.7% since early May.

But even that relatively rapid rate would have to rise to result in one billion active Windows 10 devices by mid-2018. Microsoft would have needed to post an average compounded quarterly growth rate of roughly 19% to meet its goal.

"They made a bit of an error by throwing the number out there and inviting everyone to track it," said J.P. Gownder, a Forrester Research Inc. analyst.

Mr. Gownder believes Microsoft will reach the one-billion-device target, but not until the beginning of 2020. And while the "major culprit" for the target miss was a faltering Windows phone business, he noted potential "softness" in sales of personal computers to consumers.

Microsoft is offering free upgrades to Windows 10 for devices running Windows 7 or Windows 8 until July 29. After that, consumers who want the latest version will have to pay $119 to upgrade devices that aren't already running Windows 10 or buy new devices. That could slow the pace upgrades for consumers.

"That part of the market," as opposed to corporate customers, "is a bit of question mark after July 29," Mr. Gownder said.

Write to Jay Greene at [e-mail]

(END) Dow Jones Newswires

July 15, 2016 15:25 ET (19:25 GMT)

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