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Yet Another Microsoft is Losing It Report

I’m surprised the story isn’t getting a lot more coverage. The other day, it was reported that Microsoft is taking a $6.2 billion write down because their $6.3 billion purchase of an online ad service, aQuantive, in 2007, was a waste of money. Why aren’t Microsoft’s stockholders screaming?

Now the reason Microsoft bought aQuantive is the same reason Google bought DoubleClick for $3.1 billion that same year. Both are fighting hard for online ad dollars. Microsoft, having spent more twice as much to get in the game as Google, was the big loser.

It’s also reported that Microsoft continues to lose $500 million every quarter in their failing attempts to make Bing into a search colossus. All that’s happened is that Google’s share has edged a hair upward, while Bing has taken market share from Yahoo!. But as most of you know, Yahoo! uses the Bing search engine, so Microsoft’s efforts ended up being a game of musical default search engines. Pathetic!

This week, Microsoft announced upgrade pricing for Windows 8 for consumers, and it’s clear Apple has forced them to take a bath on pricing. With Mountain Lion going for $19.99 when it comes out later this month, Microsoft has decided that anyone using Windows XP or later can download the upgrade to Windows 8 Pro for twice that figure. The DVD version costs $20 more. Now maybe Microsoft does believe that Windows 8 is twice as good as Mountain Lion, but they are actually just bringing consumer pricing more in line with what OEMs, the PC makers themselves, pay for a Windows license.

So Microsoft is hoping, at a time when 40% of the Windows user base is still running XP, to persuade a larger number of consumers to get Windows 8 by charging a lot less. Since businesses buy special multiple seat upgrade packages, the pricing structure there is more complicated. But it’s not at all clear that businesses care one whit about Windows 8. Companies who are still using XP will probably move to Windows 7, assuming they are actually going to upgrade. Windows 8 is just going to cause too much of a disruption because of the uninvited interface changes, and the need for employee retraining.

But the most curious development at Microsoft in recent weeks is a certain clueless interview with co-founder Bill Gates. His grasp on reality was never as uncertain, as he imagines that Apple, who makes the best selling tablet on the planet, must somehow copy features from the Surface. He believes that the Surface will somehow “disrupt” Apple.

I’ll let you digest that statement before I comment, and please hold back the laughter. The delusional statements from Gates makes it clear why Microsoft has never grasped the tablet market, and why all of their attempts to boost PC tablet sales have failed. I cannot imagine how they’ve come to the conclusion that Apple should alter iOS, add a tiled interface, put a keyboard inside a removable cover, and add a pop-out stand that restricts you to a landscape position. Or maybe Apple should install two stands.

Microsoft continues to believe that a tablet is simply a traditional PC in a smaller, thinner form factor. To them, a touch-based virtual keyboard is an accommodation. You really want to use a regular PC keyboard, however thin, with a trackpad. Microsoft expects you to run the same OS and software on a PC and on a tablet. They are one and the same, and the only difference is size and, perhaps, the use of touch on the tablet, even though Windows 8 provides similar gestures on a PC.

Of course, the larger question is whether the Surface will actually see the light of day in any version. With HP reportedly ditching the idea of an ARM-based tablet, though, it may fall to Microsoft to prove that such a product has any potential. It appears that HP and other PC makers will probably concentrate more on the traditional Intel-based tablets; you know, the ones that have utterly failed in the marketplace.

There’s one question that should have been asked of Gates, but most members of the media are probably fearful of offending him. That question: If Windows 8 comes crashing down in flames, or only has modest success in the consumer market, what is Microsoft’s Plan B? Do they release a special update to let you kill the Metro interface, and rely on the Aero-free version of the traditional Windows desktop? What is their solution? Or will they keep scurrying through the same rabbit hole?

Certainly the fact that some usually pro-Microsoft pundits have criticized Windows 8 ought to be a wakeup call. Microsoft can hardly be ignorant of the fact that they are putting the final touches on an OS that isn’t getting the love from the people from whom they expect full support.

Of course, this isn’t the first time Microsoft has run into serious OS problems. Consider the issues with Windows Vista, a serious under-performer, but don’t forget the pathetic Bob interface add-on from 1995, where Microsoft hoped to give Windows a dose of the warm and fuzzies by replacing the Program Manager with a simpler cartoon-like look and feel. Or maybe few remember Bob’s failure, or even its existence.

Windows 8 comes across as yet another effort to fix something that isn’t exactly broken. After all, the standard Windows interface works. Hundreds of millions of people use it every single day with a reasonable level of success. While there is a lot that can be improved, such as the dreaded Windows Registry database, throwing out the core interface with something that’s not demonstrably better isn’t going to solve the problem. It’s just putting a fresh coat of paint on a structure that has a broken foundation.

But that’s a message that Microsoft will simply not grasp, even if the latest ventures fail.