Microsoft Cortana – Euthanasia

I think Cortana will go back to the research lab.

• Cortana is set to become a productivity-based digital assistant which in reality means that Microsoft is cutting the resources it has allocated to it, paving the way for its demise and a whole-hearted switch over to Amazon Alexa.
• Cortana is one of the last remnants of Microsoft’s consumer-facing activities that fell under the knife when Satya Nadella took over as CEO in 2014.
• Since that time, he has done an excellent job of breaking down the ivory towers within Microsoft and re-focusing the company on a more collaborative but enterprise-focused strategy.
• Cortana was originally designed to go on Windows Phones but when these disappeared, Cortana was rendered homeless.
• It ended up a refugee on PCs but because it had been designed to run on phones, Cortana was not really able to help very much because activities on PCs are very different to those on phones.
• Since then Cortana has sat on PCs and been largely ignored by users meaning that this new switch to a productivity focus is unlikely to make much difference.
• In fact, Microsoft is tightening access to Cortana such that only those that are securely logged in with a Microsoft account will have access to it and all of the usual skills like playing music and controlling the smart home will no longer work.
• Microsoft has not invested in Cortana since it became resident on the Windows 10 desktop which has meant that its presence is more of an annoyance than anything else.
• Microsoft has claimed that Cortana is deeply integrated with Office 365 but asking Cortana to do anything is Office is more cumbersome and time-consuming than simply clicking with the mouse.
• Furthermore, most of the time Cortana has no idea what the user is talking about rendering it effectively useless.
• Microsoft has once again reiterated that Cortana’s skills will be deeply integrated into Office apps, but Microsoft has been putting out this message for several years now and I don’t think that it is very serious about this.
• Instead what I see is a retirement of Cortana and an opening of the way for Amazon Alexa to become more deeply integrated into Microsoft devices as its user-facing offering.
• Microsoft is still very serious about its AI offering which combined with Bing does give it a potential home for Cortana.
• This would be in the research lab as speech and speech recognition is still a very active area of research, and it could eventually have applications in Microsoft’s core enterprise businesses.
• As a result, I expect to see Alexa featured more highly on Microsoft devices which could lead to it being included in the operating system and set as default.
• I think that overall, personal assistants do not have much of a role to play in productivity largely because productivity devices already have excellent input systems (keyboard, mouse) making the bar for good voice interaction all the higher.
• Hence, I think this announcement simply signals Cortana’s quiet and graceful exit into what will become a very crowded graveyard.
• Microsoft shares have already gone far beyond that which I thought was possible and a lot of this has been due to the expansion of its earnings multiple.
• Hence, I continue to think that the valuation looks pretty rich and would not be inclined to buy the dip.