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  • The Truth Revealed: Microsoft Can’t Compete!

    March 20th, 2007

    I’m sometimes criticized for writing tabloid headlines to get attention, but I’d like to think that they all accurately reflect the contents of my articles. At the same time, I realize some of you will fight me tooth and nail over this one, because you can’t imagine that the world’s largest software company — which has its operating system on over 90% of the world’s PCs — is unable to compete.

    But the facts demonstrate that I’m right on the money here. So let me explain.

    Exactly where does Microsoft own markets? Well, as most of you know, they dominate in operating systems and applications. Both Windows and Office overwhelm their competition by huge margins, and they contribute to the largest percentage of Microsoft’s revenue and profits.

    However, when Microsoft strays outside of its core business, it runs into trouble, even though they can be a fearsome competitor. Or at least that’s the usual perception.

    Take online services. Once upon a time, AOL was sitting pretty as the world’s number one ISP in the years before the disastrous merger with Time Warner. The arrival of MSN was greeted with fear by many of the folks laboring over at AOL. I remember it well, since I was a paid forum manager for AOL at the time.

    Of course, in retrospect, AOL had other things to worry about of more immediate concern. MSN only built a subscriber base that was a fraction of AOL’s, and then the market moved towards broadband.

    Today, the remnants of MSN have been rebranded as Windows Live. You see, when Microsoft can’t succeed at something, they give it a shave and a haircut and call it something different.

    Now when it comes to search, what is there about Windows Live that would have more traction than MSN Search? Well, maybe because Microsoft has developed this obsessive-compulsive scheme to give everything it does the Windows label, as if that name had sex appeal.

    Except for the Zune music player, where the Microsoft brand name was buried in a smaller typeface, so maybe you wouldn’t notice. But you did, of course. Of course, it didn’t matter if Zune was renamed Zone or Zapp or Windows Portable Player. Well, at least the latter would give it a name that is consistent with other Microsoft products.

    Regardless of what the player was called, it wasn’t destined to succeed. Aside from the flawed Wi-Fi technique of “squirting” songs to a fellow Zune user — if you could find one — there was nothing new or different about the player.

    As an aside, I just wonder if Microsoft’s betrayed PlaysForSure partners are gloating over Microsoft’s latest failure. Worse, while the other companies actually try to make a profit from their music players, Microsoft had to subsidize theirs to keep the price competitive with the iPod.

    But what about the Xbox? Isn’t that a success, a viable competitor to the PlayStation and Nintendo? Sure, tell me another one. You see, Microsoft is dumping billions of dollars to prop up the Xbox, in the hope that sales of games will account for the difference.

    Now let’s compare that to Apple’s approach, where they make a profit — or try to — on everything they sell. Indeed, the iPod is a huge income generator, and the more they sell, the less they pay for the raw materials. So they can cut the price — or keep them stable — and up their margins. It’s a neat deal. They even earn a few cents on every song they sell. I gather the phrase “loss leader” isn’t in the vocabulary of Steve Jobs.

    Sure, Microsoft’s intentions are probably honorable as profit-making corporations go. They hope and pray their investments in gaming and music hardware will some day pay off and yield genuine profits. On the other hand, their track record of success when they stray beyond their traditional product lines isn’t all that terrific.

    Sure some tech journalists will simply fawn over anything Microsoft does, however ill-thought, simply because they are Microsoft. They are supposed to be all-powerful, invulnerable, unbeatable.

    That is until you compare the market share of the iPod against the Zune, or see what the MSN online service achieved compared to AOL at its peak, or what Windows Live search does now compared to Google.

    Oh yes, Windows Live is been losing market share even as Yahoo maintains its status quo and Google continues to grow.

    Now I won’t go into the nasty details of how Microsoft sealed its dominance of the PC operating system and office suite markets way back when. Microsoft may believe it can repeat history, but so far they haven’t done a very good job trying.

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