Is it too late for Microsoft?

Microsoft shifted from a company that creates new markets and leads innovation to a company that defends its position in existing markets.

Microsoft lived through one of the most innovative times and was positioned better than many other companies to capture market opportunities. However, it still missed on markets such as: tablets, e-readers, smartphones, consumer stores, cloud computing, social networking and mobile music.

Microsoft tried unsuccessfully to capture some of the markets listed above. For example: They went into search with Bing, but they lost to Google. Another example, they released Windows Vista, five years after XP which is longest time between releases. And yet, it was one of the worst product releases. This hurt their credibility because Windows and Office are the core of Microsoft’s products.

What innovative products did Microsoft release since Bill Gates stepped aside as the CEO? Microsoft basically is the same company since 2000, its core products are Windows and Office dedicated for PC. Today PCs are losing to tablets and smartphones, which decreases Microsoft’s power in the market. Also, we have a trend where businesses are switching to easy to operate and cheap (or free) software, which also makes Microsoft less relevant in the market.

Leaving aside the product side, if we measure a company by its equity returns then Microsoft does not look good either. In its peak, in 2000, Microsoft was worth $642 billion, today its worth is $290 billion. Microsoft still has a lot of cash, around $90 billion. If you ask yourself “How did they manage to make that much cash in the last decade?”. The answer is it was by monopoly in the PC business, their cash generator.

Microsoft’s latest efforts to move to mobile and cloud might be too late. In 2014, new CEO, Satya Nadella introduced a new vision. Nadella said that he is looking to pivot Microsoft from “devices and services focus” to a “productivity and platform strategy”. Following this new strategy, Microsoft introduced initiatives that positioned them better in the mobile and cloud-centric reality. They accepted the fact that they were late in the mobile space and decided to capture the market by providing excellent services on any platform (including competing ones). They should have moved  from PC-centric business to mobile three years ago. But they did not, and today it might be too late, because Google and Apple already captured many of the customers.

Some might argue that the launch of Windows 10 gives a positive note, because Microsoft listened to its users and went the extra mile to innovate and present new features, and they also offer it for free. However I think Microsoft won’t be able to capture the market because it will take time until businesses switch to Windows 10. Only after a large number of installations would developers be motivated to develop applications for Windows devices. And in the absence of anything very different compared to Google and Apple, Windows’ devices will be sold in single digits in the next several years.

Nadella is pointing Microsoft in the right direction by focusing on cloud computing and mobile devices. His vision is to replace smartphones with Windows 10 and unify the user experience and he is promising a lot of upgrades and features in the future. However, the questions are: Will users wait? And would it be worthwhile?

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4 thoughts on “Is it too late for Microsoft?

  1. It seems like the tricky thing with Microsoft is to get ahead of the game again. As you point out, they’ve been following other companies for years, when they used to lead. We learned about how Samsung leapt to the number one spot in the TV market, but tech is a tougher thing. How can they get the resources they need to do something surprising? Something different?

  2. No way! Microsoft might not be first, but as a fast-follower, they’re killing it.

    Case-in-point: their web-app versions of the office suite are incredible. For all but the powerest of power user, top desktop publishing tech his available to everyone for free. They knew they had a built-in user base because of Office’s entrenchment, so they took their time and got it right–IMHO way better than Google Docs.

    Onedrive, too–if you haven’t tried this, check it out. Again, my opinion, but it crushes any alternative. Starting capacity is like, 15 GB, and the UI is tops. And at least on android, every one of their office apps is best-in-class.

    But, certainly not all homeruns (e.g., windows phone is… well, y’know).

    1. I agree, they are a fast follower in some cases. But I’m not sure if it is a sustainable position for the long run and what would be their positioning when PCs lose to tablets. May be you are right and they will be fast enough to adapt.

  3. I’m probably somewhere between you and Brandon on the Microsoft optimism scale. I would point out that their Surface Pro line has been fairly successful. Even Apple (yes Apple) is copying them with their new tablet. Microsoft, like SAP, has such a large user base that it will take a long time for them to die, which is why I dont think they will die. They have enough money to play catch up by being a fast-follower or by buying their way back into contention.

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