Microsoft will not be a major player in 10 years time

Tristan Kitchin believes Microsoft need to focus on quality, not quantity.

Microsoft was given a breath of fresh air last week as its search engine, Bing, made market share gains in the U.S. According to the latest ComScore data provided by investment firm Macquarie Capital, Bing was responsible for 17.4 percent of searches in May, up 0.10 percent on April. The news will be warmly welcomed by the technology giant; its Bing service has struggled for years to make an impact against Google Search, or even make profit. It is this lack of success that lead to calls last month by Nomura Equity Research analyst Rick Sherlund to sell (or even just give away) the search engine to Yahoo, on the grounds it made no business sense to hold onto.

Give away? Even after all the money that has been poured into it?

Bing is one of the latest in a line of ineffective and poorly marketed services/products released by Microsoft. Microsoft’s online services division, fore fronted by Bing, has been hemorrhaging money in recent years, and continues to report losses despite recent market share gains.

Furthermore, not only have analysts been suggesting Microsoft abandon ship with Bing, but there have been calls for it to sell off its Xbox division too. But isn’t the Xbox one of the world’s most iconic consumer products, and, more importantly, profitable?

Microsoft's search engine 'Bing' has been losing the company money for years.
Microsoft’s search engine ‘Bing’ has been losing the company money for years.

Xbox may outsell rival products on a monthly basis within the U.S, but profits from the division pale in comparison to other areas of Microsoft’s business: Windows Server, Windows, and Office for instance. Furthermore, following the company’s relatively unimpressive Xbox One reveal, which has been panned by many critics and consumers alike for its DRM policies, the future of the Xbox division looks very dim indeed.

Microsoft has been treading a fine line for a while now. In the last decade it has aggressively diversified its business, expanding into new markets and industries, pouring money into its new ventures expecting them to succeed. Despite the amounts the company is willing to write off in order to ensure the success of a new product, through this business model we have seen minimal success; Office and Xbox have remained relatively successful (as was Windows 7), but Microsoft is not without its fair share of failures. Zune, Windows ME, Bing (arguably), Windows Live Gaming, Kin… We can also add Windows 8 and Vista to the list; although both products emerged profitable, they were both individually responsible for incurring large drops in the company’s American Customer Satisfaction Index (ACSI) rating, and were both internationally panned by critics, consumers and manufacturers alike.

In fact, it’s the relative dissatisfaction with Windows 8 that leads me to my next point; I do not believe Microsoft will be a major player in ten years time.

The PC industry is dying. No, we are not going to stop using computers and move onto tablets, but there has been a big shift in the market in recent years. The gap between PC and tablet sales have been closing since the iPad was first released, and the expansion of the market with the introduction of Android has only served to lessen this further. In fact, the IDC believes tablet sales will surpass PC sales by 2015, and laptop sales sometime in 2013.

IDC Stats
The IDC predicts tablet sales will grow 58.7 percent in 2013 to 229.3 million units, up to 332 million units in 2015, and 410 million in 2017.

But Windows supports tablets you say? Windows 8 is a hybrid operating system designed to work on both tablets and PCs, yes, but users do not like the new platform – too much was changed at the expense of user comfort, creating a brand new experience which people did not like. Windows 8 license sales have been good, it sold 60 million licenses early on in the products lifecycle, but that’s no where near as good as its predecessor with it being shunned by the commercial sector. Furthermore, sales of new PCs/tablets running the operating system have been very low; people would seemingly rather buy a tablet with Android or iOS instead of Windows 8. As a result, we have also seen a shift away from Windows by manufacturers; they have become disenchanted with the Windows operating system, becoming more interested in Android as a result of its low costs and current popularity.

Microsoft’s influence has been waning in recent years, and the company has looked a bit like a headless chicken at times. It has jumped into new markets, throwing money about, expecting success to just appear. Andrew Tonner, a tech/telecom analyst at The Motley Fool, said:

‘They [Microsoft] simply don’t get where technology is going anymore’

I am inclined to agree with him. Windows 8 may not be Microsoft’s biggest catastrophe, but it is the latest in a long line, and no doubt not the last (Windows Phone anyone?). The company has spread itself too thin; it is trying to do too much. It is attempting to take on both Apple and Google, in their own markets, at the same time, and win… Yet it is failing miserably. The only way Microsoft is going to get itself out of the rut is if it rethinks its business model, and focuses on a few key industries instead of trying to do too much at once. It needs to stop focusing on quantity and focus on quality. Unless it realises this, and soon, the once behemoth that was Microsoft will soon be history.

3 COMMENTS

  1. My brother and I were just saying this yesterday. It’s not outside the realms of possibility that a similiar monopoly law to the one that destroyed IE a few years ago could be applied to operating systems. That would be a hammer blow.

LEAVE A REPLY

Please enter your comment!
Please enter your name here