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  • The Microsoft Death Watch: The Clock is Ticking

    January 19th, 2012

    While this article is written ahead of Microsoft’s investor conference call for their most recent financial quarter, they are confronting a wealth of problems that cast a huge shadow over the company’s future prospects. Yes, they will continue to earn high profits from the sale of software and sales, but the PC market has changed, and it doesn’t appear they fully grasp the consequences.

    When Apple reports Mac sales next week, it will be clear that more and more people are avoiding new PCs and buying Macs instead, or possibly iPads. Market leaders Dell and HP are suffering from declining sales, and more and more companies are offering Macs and iPhones to employees to, in part, convey a sense of being contemporary. PCs are yesterday’s news.

    Sure, Microsoft is making a big deal over the release of Windows 8 later this year. But their priorities are peculiar. While Apple built a special slimmed down version of Mac OS X, dubbed iOS, designed strictly for mobile gadgets, Microsoft isn’t quite sure how to emulate that approach. They have repurposed the failed Metro interface from the Zune and iPhone and made it the face of Windows 8. But it’s just window-dressing in the worst sense of that pun. Beneath that overlay, it’s still just plain Windows.

    Yes, Microsoft is building a version of Windows 8 for ARM-based hardware, no doubt in response to Apple and Google, but that doesn’t guarantee success. After all, Windows apps still won’t run on the mobile gear. It’s an issue that some members of the tech media never seem to understand. Microsoft often announces intentions to do something, but there’s never a guarantee that the promised product or service will ever appear. Even if the product does appear, some features may vanish with empty promises that they’ll return in the future. Take a look at the original feature set for Windows Vista and you’ll see what I mean. But how many members of the media called Microsoft for their constant failure to deliver?

    This year, the Zune digital player was cancelled. As the iOS and Android OS continued to dominate the smartphone market, Microsoft’s Windows Phone was saddled with a single digit market share and stagnant growth. Although Nokia is starting to market smartphones with Microsoft’s OS, that’s no guarantee of success. Nokia has only been doing well with less profitable feature phones.

    When it comes to smartphones, it’s actually hard to see where there’s room for another player. Both Apple and Google’s Android partners have carved out substantial shares of the market. Even assuming that Apple garners more and more victories in their ongoing legal battles against Android licensees, at best the losers will just remove or redesign features to avoid possible patent infringement. Some suggest Apple will license some of their less critical intellectual property and, as Microsoft does now, get a check on nearly every Android smartphone sold. Indeed, it may well be that Microsoft is making more money on Android smartphones than for licensing Windows Phone.

    However, Microsoft appears, on the surface at least, to be utterly tone deaf about such considerations. They continue to tout a Windows-anywhere strategy, imagining that the next generation of tablets with the ARM version of Windows 8 will somehow fare better than previous Windows tablets. This in a market where the iPad is king, and the Android-based Amazon Kindle Fire and Barnes & Noble Nook are pulling up the rear. The rest of the Android contenders are going nowhere, and there are published reports that RIM might be trying to sell off all or part of the company.

    This doesn’t mean there isn’t room for more competition, or that Microsoft is a paper tiger. Clearly the company has had a long ride on the top, and Windows still powers the vast majority of traditional personal computers around the world. But that share drops considerably if you regard smartphones and tablets as PCs too. So Microsoft must find a way to embrace the future before they become a relic of the past.

    Sure, Microsoft has done pretty well with game consoles and related gear, but Apple has demonstrated that the iOS is a more and more compelling platform for gaming. The titles you buy at the App Store are far cheaper than the ones you buy for personal computers or dedicated gaming hardware. The biggest developers are on board, so what is Microsoft to do?

    It may well be that Microsoft’s worst problems are top-down, and that Steve Ballmer and his executive lieutenants are poor managers who haven’t a clue how to fix the company’s problems. Even if Ballmer was ousted, or left voluntarily, that’s no guarantee that Microsoft’s future fortunes will of a sudden turn around. That might take someone who isn’t afraid to make major changes, as Steve Jobs did in 1997 when he took over Apple.

    Sure Apple then was close to failure when Jobs returned. Microsoft can continue in the same groove and remain highly profitable for years to come. But the handwriting is on the wall. I only wonder if Microsoft’s leadership will read the warning signs before it’s too late to recover.



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    5 Responses to “The Microsoft Death Watch: The Clock is Ticking”

    1. dfs says:

      Microsoft has one big problem in the portable market. They got to where they are by designing a ubiquitous OS which could run on a wide variety of machines and was not tied to any single model or brand of PC. But now they can’t have the same success — Google’s Android got there first, so they are painted into a corner and can’t repeat their former business model. What to so? The same thing MS ought to be doing in a lot of other ways: stay the heck out of that market and stick to what they do best. Despite the popularity of mobile devices, PC’s aren’t about to go away, and neither is the need for Office. This is particularly true for the Enterprise. If MS only existed to service this market they would have plenty of nickles and dimes rolling in for many years to come. I can see that in theory an integrated desktop/ mobile ecosystem ought to be superior to Android, but by this time Android is too well entrenched, that train left the station quite a while ago. At this point it would make better sense to drop any aspiration to the mobile market and partner with Android on creating such an ecosystem. That’s the only either Google or MS can hope to compete with Apple.

    2. Al says:

      Microsoft should start porting Office into anything that moves. That includes Android and iOS. Office is turning out to be a more durable monopoly than Windows. If MS keeps shutting Android and iOS out of the Office party, they are risking somebody else becoming the de facto standard office suite for tabletworld. But I’m just some ignorant schmoe who’s never thrown billions of dollars away in support of a slew of failed products so what do I know?

    3. Mel says:

      Micosoft hasn’t done as well in consoles as one might think.

      For years MS was billions of dollars in the red selling the Xbox at a loss to gain marketshare. It’s only recently been making money in that market off the back of expensive games, but Apple is now eating into that cash cow with the success of gaming on its and the low cost of iOS games.

      For how long will MS, Sony and Nintendo be able to sell games at $40, $50 and up in the face of 99c and $9.99 games for iPod touches, iPads, iPhones and soon AppleTVs?  Loss leader consoles from the first 2 are in real danger of having the rug pulled out from under them.

    4. Jim G says:

      The main reason MS grew in the past was due to their partnership with IBM. Everyone wanted a reliable office PC and when Big Blue got into the business, all the CP/M machines went away. Gradually, MS found a way to get rid of Big Blue and take it all for themselves.

      Tablets and phones are quite a different beast. There is no 800 pound gorilla making these devices that everyone would want to buy from. Even Nokia doesn’t have that power. MS may have partnered with Nokia but the result will not be the same as IBM. The Windows brand is too uncool and out of favor with the consumer market to go anywhere.

    5. Shameer M. says:

      @Mel

      From an innovation standpoint, the Entertainment & Devices Division, of which the Xbox & Windows Phone team is a part of, is doing very well. The popularity of the Kinect took right from the starting line and hasn’t shown any signs of slowing down. Plus the fact that the Kinect SDK is now available for PC’s so who knows what creative uses developers can come up with.

      The innovation and work from the Windows Phone teams is permeating many other MS division with the great work they’ve done with the Metro UI and integration of OS and cloud services. This has already made its way in the Xbox, and soon to be released Windows 8. And that’s just a start.

      Unlike many others, I don’t see the death of MS. The last couple of years they’ve made the right moves to set themselves up for the next decade. I think 2012 will be the year when begin their come back. Don’t get me wrong, I’m not implying they’ll kill Apple or anything of the sort. But MS will definitely reinvent itself in a good way.

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