I'm seeing a lot of tea-leaf readers looking for the meaning behind Microsoft's decision to combine its Operating Systems Group -- which it's now again referring to as "Windows" -- and its Devices group under Executive Vice President Terry Myerson.
Some think the move is a precursor to Microsoft getting rid of some, and maybe ultimately, all, of its first-party devices, which include Surface, HoloLens, Lumia, Surface Hub, Band and Xbox. At the very least, the move MUST be signaling that Microsoft plans to exit the Windows Phone hardware business, some argue, given that business is just limping along.
Back in April, CEO Satya Nadella said there were potential cost cuts coming again to Microsoft's hardware unit. "We need to take further action to reduce our costs across devices as we execute on our Windows 10 first-party hardware plans," he warned during the company's last earnings call.
But I am doubtful that Microsoft is gearing up to exit making first-party hardware, given how many resources it's putting into HoloLens and Surface. Plus, with all the work Microsoft is doing around Windows 10 Mobile, the operating system for Windows Phones and small tablets, I'm also fairly skeptical Microsoft will dump its first-party Windows Phone hardware -- at least any time soon -- as there aren't many/any OEMs building flagship Windows Phone devices. The vast majority of Windows Phones sold remain Lumia devices made by Microsoft.
The Microsoft fitness Band, which, by the way, soon will be the company's only first-party hardware not (yet) running the Windows 10 core (it has firmware inside), is a prime example of why Microsoft is continuing to make its own hardware.
Microsoft Health, the core service around which the Band is made, builds on a bunch of Microsoft Azure services, including Application Insights, Azure DocumentDB (the company's NoSQL service), Azure HDInsight (Hadoop on Azure), Azure Service Bus, Azure Data Factory, Event Hubs (the Microsoft telemetry ingestion and processing service), Azure Stream Analytics (real-time stream processing) and Azure Machine Learning.
What's more valuable to Microsoft: The $200 people pay for a Band? Or the recurring revenues the company stands to make from services that power the Band? I'd say the latter.