Windows 7 is not Vista. This is clear. And the Microsoft of 2009 is not the bumbling Microsoft of a few years ago. There are probably internal management reasons for this. Microsoft is beginning to feel vibrant again. AIG and CitiBank may have been too big to fail, but Microsoft never was. It has spent the best part of 8 years in the doldrums, letting the competition nibble away its its monopoly and doing all most nothing to address the twin threats of Apple and Google. Microsoft had stalled.
It took Microsoft the longest time to respond, but Microsoft began to prepare its response a while ago. This year has seen it deliver a good deal of its response. The question now is whether the response will be effective. Here’s my view:
- Windows 7 will be successful within limits. Microsoft squandered a good deal of revenue with the indisputable failure of Vista, but it also created a pent-up and growing demand to get away from Windows XP. Many of Vista’s capabilities were needed even if poorly implemented and the Windows 7 implementations are much better. Roughly speaking, Microsoft is now competitive with Apple, or at least within reach. It’s too late for Microsoft to put the Mac genie back in the bottle, but at least it’s a much fairer fight. The migration to the Mac may slow a little, but for reasons explained later, it will not stop.
- The Microsoft retail push will have some success. Apple has performed retail miracles. Apple’s stores are the greatest retail success story in modern times, with the highest dollar sales per square foot in the US and probably the world. Microsoft is unlikely to equal that or beat it, but I have no doubt that the Microsoft retail push will raise revenues for Microsoft as it expands its retail chain. I don’t think it’s going to be loss-making. Microsoft has sensibly hired some of the people behind Apple’s retail success to guide it. It only needs to do half as well as Apple for its retail push to be a really good business move. However, it will need many shops before it comes anywhere close to Apple.
- Microsoft and Internet Retail – not good: Microsoft’s music revenues are a pale shadow of Apple’s and it’s doubtful whether it will ever be able to compete in media. After all, there’s also Netflix, Amazon, Google and Hulu in this game. It has just started to sell PCs on the Internet and it’s possible that its net store will be profitable – acting as a complement to its retail outlets.
- Microsoft and an App Store – Far too late: As regards the iPhone. The game is pretty much over and Microsoft has only just turned up to take part. The question here is what will be left for RIM, Palm and Nokia after the iPhone saturates the smartphone market and that won’t happen for a few years yet. How Microsoft intends to play is, as yet, unclear but it will be a minor player at best. The iPhone has all the apps.
- Bing is competitive. I use Bing. I don’t use it much, and I don’t expect I’ll ever use it for my major web searching activity. But I use it when I intend to buy something on the web – when I’ll need to visit several sites (for example a camera or air travel). I use it because it is better. I’ve heard other people say the same. However this is a real tough fight for Microsoft. It takes time to get even a 1% change in surfing habits, so Google has lots of time to parry any Microsoft success.
- Microsoft still strong in the corporation. One bright spot over the past 8 years has been Microsoft’s growth in the data center with its business apps, database and Windows on the server. The primary competition here goes by the name of VMware – a company which many now believe is more relevant to the data center than Microsoft, because of its virtualization capability. Microsoft introduced its own virtualization offering this year, bundled with Windows and it has seen good take-up. However VMware still looks strong. There is a battle on, but I don’t see Microsoft losing market share in the business market right now.
- The XBox triumphant. 2008 was the best year ever for the Xbox and 2009 is proving very strong too. Microsoft is beating Sony, although it is still a way behind Nintendo in market share.
This is, like the curate’s egg, “good in parts.” My view is that the real problem for Microsoft goes by the name of iPhone. Microsoft has no response to the iPhone and the iPhone is now dragging customers into using the Mac. Apple is also gradually adding two more dimensions to its competitive position. The “long predicted iTablet” will be here in a few months and it will be a game changer. It will be more of an iPhone than a Mac and it too will have a consumer drag effect. It could easily redefine the laptop market. That sounds like crazy talk right now, but check back in about a year and see if I’m wrong.
Also the recently announced clutch of Macs included a 27 inch Mac that would work fine as a television. Apple is gradually edging into the TV market and it will have its piece of that market, as the consumer gradually gets used to watching television from the web. It’s all heading in that direction.
Apple is defining how markets evolve. Microsoft used to do that and it’s a way away from regaining the position where it can. But at least it has begun to compete again.
























