Microsoft: Going All-In With Voice

| About: Microsoft Corporation (MSFT)
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Microsoft is focusing its Build conference on voice.

Voice is the operating system of the Internet of Things.

Negotiation will prove as important as technology, and that will take time.

Voice is a tough nut to crack.

Everyone speaks differently. There are different accents, different languages, and different tonalities. I'm still waiting for a program that will let me turn on my smartphone like a tape recorder and deliver me a printed interview.

So why is Microsoft (NASDAQ:MSFT) focusing its Build conference this week on voice?

Mainly, because voice solves some important problems as we move from the cloud-and-device era to the Internet of Things era, where there is intelligence in everything. The uniqueness of our voice can become a security feature. It's convenient in a world where processing is available in things that are too small or simple to make touch interfaces practical.

The problem is there are a multitude of voices out there, and choosing one really means choosing your interface for the Internet of Things world. (NASDAQ:AMZN) is already selling voice interfaces through its Echo product, which gets its nose under the tent. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) has been working on voice interfaces through Android, and Apple (NASDAQ:AAPL) has Siri, which should connect its iPhone and its Watch to users. Even Facebook (NASDAQ:FB) is in the face with a project based on the Jarvis character in the Iron Man movies.

Getting a marker down, even if the technology isn't yet ready for prime time, is essential. Voice is the operating system of the future, Microsoft's DNA is all about getting under the future through the operating system, and so the move becomes an obvious one.

Voice in the form of Microsoft's Cortana technology is the "hidden agenda" behind everything MSFT is doing at the Build conference. The next version of Windows 10, due out this summer, will be all about voice. Embarrassment over its Tay chatbot aside, CEO Satya Nadella sees voice "bots" as the applications that make the Cortana technology indispensable. Voice bots are the Word and Excel that turn Cortana into the next Windows.

Given the level of competition in voice, however, moving toward the operating system through applications becomes tricky. Android has a dominant mobile market share, so Microsoft wants Cortana to read Google calendar appointments. Issues like this will prove tricky for all the players. If Microsoft is correct, that voice is the future of the operating system, then anything like interoperability can be seen as a Trojan horse, an attempt by a rival to have their operating system take over what you have built.

For this reason, it's hard to see anyone winning this war quickly. A lot of money is going to have to be invested to perfect this stuff, but none of it is going to have a critical mass of applications until questions of interoperability are settled, a negotiating process rather than a technology one. Given the stakes, that's going to take a while to sort out.

Don't expect quick profits in this new "great game." It reminds me most of the games played by Microsoft, IBM (NYSE:IBM) and other companies around graphical user interfaces in the 1980s. I expect Microsoft to do well here, but I don't expect it to do well very quickly. We are three years of investment away from this being an investable technology.

Disclosure: I am/we are long MSFT, AMZN, GOOGL, AAPL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.