Microsoft: The Long Road Downhill

February 18th, 2008

They say that you reach your physical and mental peak in your 20s, and you decline slowly but inexorably thereafter. You may extend your lifetime somewhat by eating healthy food, exercising regularly and watching your weight, but you can’t control the influence your genes have on you. There’s only one final end to the great struggle of life.

Of course, a corporation has its own lifecycle that may be far less predictable. Companies expand and contract, and may even end up expanding again, and certainly Apple fits into that category.

Microsoft? Well, some of us believe their best years are behind them and that, if they don’t change their ways, they will, over the long haul, fall extremely far from the mountain top.

On the surface, this would seem to be a damned peculiar suggestion to make. After all, Microsoft continues to earn record profits, and its operating system and office applications are far and away the most used on the planet. At the same time, you can see areas where the bricks are crumbling.

Take the venerable Web browser. Internet Explorer continues to lose market share at the hands of Firefox and, to a lesser degree, Apple’s Safari, which is now also available for Windows and iPhone users. Even offering Internet Explorer 7 as a standard upgrade for Windows XP, and as the default browser on Vista, has done little to slow its inexorable decline.

Apple has certainly made inroads into the Windows world, first by offering improved compatibility, but most important by convincing more and more people to switch to the Mac. As Apple often says during meetings with financial analysts, fully half the people who buy new Macs at an Apple Store are new to the platform and most of them are ditching Windows.

Microsoft’s efforts to lock people into its own media DRM has proven to be a failure. Today it’s all about the iPod, and the iPhone has already seriously encroached into the Windows Mobile market share.

On the hardware front, Microsoft may have shipped a lot of Xboxes, but it may have come, in part, by stuffing the channel and waiting for dealers to move the excess inventory before it catches too much dust. Worse, the Xbox 360 has been plagued with serious hardware defects that forced Microsoft to take a charge of over one billion dollars to repair the things.

When it comes to supporting the emerging high definition DVD standard, Microsoft got in the HD-DVD camp early on, offering such players as an option with the Xbox. But it is widely expected that HD-DVD’s creator, Toshiba, is preparing to throw in the towel and give up its fight against Blu-Ray. So where does that leave Microsoft and its unsold HD-DVD players for its game console?

Not to mention the fact that, between the Xbox and the failed Zune, Microsoft has taken a loss of billions of dollars. They continue to believe that if you toss enough cash at a problem, it’ll solve itself. Compare that to the combined total cost of developing every single version of the iPod, the iPhone, all recent Macs and Mac OS X. Microsoft still spent a whole lot more, and where did that get them?

I will avoid, for the time being, Microsoft’s desperate effort to bear-hug Yahoo and somehow take two losing online ventures and turn them into a smashing success. Even if that were to happen, it would place Microsoft in deep debt for years and the synergies, such as they are, may also take an extremely long time to realize.

All this while disgusted Yahoo employees send their resumes to Google.

But wait, there’s more.

Consider that petition, with over 75,000 signatures, from Windows users begging Microsoft to continue to sell XP past its June deadline this year. Also consider that Windows Vista is widely regarded as a huge failure, even though tens of millions of PCs with the new OS installed continue to sell on the retail and corporate markets. And don’t forget the fact that an untold number of those PCs are being downgraded to XP as soon as they’re taken out of their shipping cartons.

Then there’s Microsoft’s alleged clout with PC makers. It didn’t stop Dell, for example, from offering several models with Linux preloaded. That has to be one huge disappointment, even though Microsoft probably still gets a check from Dell for a Windows OEM license on those computers. It’s the perception and not the reality that counts here.

In the end, all it may take is new leadership at the helm of Microsoft to save the ship before it sinks. But, regardless of how it all plays out, things will never be the same.

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18 Responses to “Microsoft: The Long Road Downhill”

  1. Thomas says:

    So very true. Similarly, as the Titanic was taking on water, the band played on.

  2. Lantrix says:

    All my mac convert friends agree with you.

  3. Andrew says:

    But Gene, what do you REALLY think about the Zune?

  4. But Gene, what do you REALLY think about the Zune?

    Honestly, I’ve never seen anyone buy one or use one.



    Sent from my iPhone

  5. Andy Carolan says:

    The only hope Microsoft have now for Vista is through the release of Service Packs. Most people who I have talked to hate Vista, existing equipment and software that lived happily alongside XP no longer works with Vista, various incompatibilities with so called “vista ready” products are also common. Im sure there are some out there who are happy with Vista, but ive yet to find them.

    Interesting news RE the DVD format war. My money was on Blu-Ray due to the format’s inclusion within the PS3 (which again, doesnt appear to have been the run-away success that Sony had hoped) – but plenty of people have bought the hardware solely for the hi-def media capabilities im sure.

    I too have never seen a Zune – maybe they dont really exist :S

  6. Dana Sutton says:

    I have to say, though, that one or two of the t. v. ads for Zune have been very cool, and Microsoft has never been very notable for its cool advertising. But Andy’s right. I don’t think I’ve ever seen anybody using a Zune, but I see iPods all over the place.

  7. But Gene, what do you REALLY think about the Zune?

    Seriously, folks, I have no problem with them, assuming they really exist. 😀


  8. Zune to be gone?

    Sent from my iPod.

  9. Jeff says:

    The person in the cubicle next to mine has a Zune. It’s the only time I’ve ever seen one other than sitting on the shelf at Target.

  10. I’ll admit that the person in the cubicle next to mine has a Zune. It’s the only time I’ve ever seen one other than sitting on the shelf at Target.

    To be perfectly honest, I saw a couple of guys trying to sell a pair of Zunes in front of a local convenience store. I actually looked one over, shared a laugh and walked off. 🙂

    I don’t know if they ever succeeded.


  11. John Fallon says:

    A co-worker of mine has a Zune (cheaper than an iPod). Nice screen and sound; looks like a old brick, and almost the same size. It wasn’t that much cheaper…

  12. A co-worker of mine has a Zune (cheaper than an iPod). Nice screen and sound; looks like a old brick, and almost the same size. It wasn’t that much cheaper…

    Screen and audio chips are pretty much commodity products, of course. But Microsoft built a clumsy imitation of a two-year-old iPod. Yes, they really innovate. 😀


  13. Dave says:

    I’m not sure I would know a Zune IF I saw one!

  14. Al says:

    I sold all my MSFT holdings last week. I have zero faith in Steve Ballmer. Apparently the man is a great numbers and details guy, that he could look at a whole wall of numbers and see patterns and anomalies that are invisible to us mere mortals. –Which was okay while Bill Gates took care of the vision thing (though I’m not saying Gates was great on it either). But does Mr. Ballmer have the vision of a Steve Jobs, or Jeff Bezos, or a Larry/Sergey? Does he have the instincts, gut feel and focus to set the right course for Microsoft? Short answer: No. Long answer: Nooooooooooooooooooooo.

  15. MichaelT says:

    But Gene, what do you REALLY think about the Zune?

    Seriously, folks, I have no problem with them, assuming they really exist. 😀


    Has David Biedny ever seen one? 🙂


  16. Probably not.


  17. gopher says:

    In spite of my being a big Mac afficianado, Microsoft isn’t disappearing anytime soon.
    As long as people have need for 90% of the software market, Microsoft will continue to sell operating systems.
    Until Mac OS X really offers WINE like support for all Microsoft Windows compatible applications, Microsoft will continue to sell operating systems. It is the same for Linux. Everyday users do not have the time to deal with command line installers, and partitioning nightmares, and try to find a Mac software aisle at a computer show or computer software store. Try waiting on hold with the Apple Store, or the genius bar, or AppleCare, or Macmall, or CDW, or Maconnection, and you lose patience. Try proving to your office that Access is a low-end database that needs to be replaced by Filemaker Pro or a better database. Try getting ESRI to make all their products made for Mac OS X.
    Microsoft unfortunately has a stranglehold on many industries that don’t know any alternative, and when they look for an alternative it hasn’t matured yet. When it matures, sure then Microsoft will have something to worry about. But until then, we are stuck.

  18. Josh says:

    Don’t be too smug about Microsoft’s demise. The economy is headed down a long downhill road of its own. Predicting how that will impact Microsoft or Apple is anyone’s guess but suspect neither will fare particularly well

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