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  • 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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