Microsoft – The bigger threat.

Looks like its curtains for Cortana.

  • Microsoft has received without a whimper a series of moves by Amazon that promotes its digital assistant Alexa over Cortana but now it has openly done the same which I think will seal Cortana’s fate.
  • I think that this is really about Google.
  • Microsoft seems to have been quite happy to let Amazon marginalise Cortana for some time, but now that it will be selling the Alexa devices in its own stores, it would appear that Cortana’s days are numbered.
  • In August 2017, Microsoft and Amazon entered into a partnership where Alexa and Cortana would offer access to each other’s services.
  • The idea was that users would have another easy conduit from which to access Alexa while Cortana would be provided with a badly needed escape from the PC where it has been stuck since the collapse of Windows Phone.
  • Cortana was originally designed to operate on a mobile device and consequently was taught how to work in a range of domains that are used on mobile.
  • The problem is that most of these domains are irrelevant on a PC and as a result, Cortana is fairly useless where it is predominantly present today.
  • Since the beginning of the partnership, Amazon has been stomping all over Microsoft’s patch with not one word of objection being raised by Microsoft.
  • This included the launch of Alexa for business (see here) and the integration of Alexa directly into HP PCs (see here).
  • This has now reached a stage where Microsoft appears to be giving up entirely on Cortana by actively promoting Alexa in its own stores which can only lead to Cortana’s eventual demise.
  • The only rational reason I can think of for Microsoft to do this would be that it is worried about Google Assistant taking over Windows.
  • Microsoft has better AI but Amazon has the assistant, the devices, market acceptance and the smart home.
  • In the consumer segment, Amazon only really cares about e-commerce and some aspects of Digital Life, none of which clash with Microsoft which appears to be on the way out.
  • Microsoft is likely to be better off with Alexa as the standard digital assistant on PCs rather than Google Assistant.
  • If it throws its weight behind Alexa on the PC, it has a better chance of keeping Google at bay.
  • This is the only rational reason that I can think of why Microsoft would voluntarily promote a competitor’s product over its own.
  • Hence, I think that Cortana will be quietly put to sleep and Alexa will end up being the default assistant on Windows devices.
  • Given that Microsoft has better AI, I can also see the co-operation deepening where Amazon makes use of Microsoft’s AI to make Alexa better.
  • This is badly needed as, compared to Google Assistant, Alexa is still woefully adrift.
  • Collaboration looks set to deepen but at the expense of Cortana.
  • I don’t think anyone will miss her.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.