Is Microsoft sinking ?

Posted on June 7, 2010

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May 26 : As expected it to happen eventually, Apple’s market capitalization now exceeds that of longtime rival Microsoft. Apple now stands at US$222.5 billion, while Microsoft is at US$219.53 billion.
Apple has now surpassed Microsoft as the largest technology company in the world by market capitalization.  Apple, on the verge of bankruptcy when Jobs resumed leadership in 1997, has transformed itself from the maker of Macintosh personal computers into a consumer electronics trendsetter with the release of the iPod music player in 2001, the iPhone in 2007 and this year’s release of the iPad tablet.
In terms of market capitalization, the only US company worth more than Apple is Exxon, at US$278 billion. Apple’s leapfrogging of Microsoft’s market cap has had less to do with Apple’s stock and more to do with Microsoft. Over the past 60 days or so, Apple’s market cap has grown by less than US$10 billion, while Microsoft’s has plummeted by almost US$40 billion. Microsoft did continue top grow, but at a much slower rate, and its once-unassailable monopolies began to come under attack. Apple, meanwhile , pull off one of the most amazing turnarounds in corporate history, creating several huge new markets in the process.
10 years ago, Microsoft was worth 35 times more than Apple was: US$556 billion versus US$16 billion. Now Microsoft’s value has been cut in half, while Apple’s has risen about 15 times.
To add salt into Microsoft wounds, on Jun 1 Google announced the banning of Microsoft Windows from internal use. Employees will be given the choice between Apple’s Mac OS and Linux. Google is also publicly citing Windows security problems for the decision and blaming Windows vulnerabilities for the China hacking incident. So that’s 20,000+ Windows licenses that won’t be sold and renewed at Google in future years.
Apple is positioned to capture a huge share of the growth of mobile and tablet computers in the next decade and to continue to gain share in laptops and desktops.  Microsoft, meanwhile, is exposed to major competitive threats to both its Windows operating system business and its bloated Office program which generate the vast majority of Microsoft’s cash flow. 
Steve Balmer , CEO of Microsoft is still adamant about Microsoft’s survival and profitability. On Jun 4 at the All Things D conference, he displayed his arrogance by laughing off the potential threats from Google with its  Android and Chrome browser. Ballmer yammered away about how Google’s strategy of having two operating systems doesn’t make any sense. ” Why have Android and Chrome? Why do two operating systems like that? Makes no sense” , he says. Chrome doesn’t make sense today but it will make a lot of sense in the future when browsers are more powerful and web-based applications are more robust.
When a competitor announces something innovative, Ballmer goes out in public, plays dumb, trashes it, acts like he doesn’t think it makes any sense, even though it does.
When the iPhone was launched, he laughed loudly at it saying it is ” the most  expensive phone in the world and not appealing as a business phone due to lacking keyboard “.  Ballmer likes to laugh at his rivals, only to become the laughing stock years later.
Take the smartphone business, for example, which Google recently entered. Unlike Microsoft’s Windows Mobile, which carries a modest license fee, Google is offering its OS to operators and gadget makers for free.
Now, free’s not a bad price, at least from the perspective of a mobile phone operator. From Microsoft’s perspective, however, it’s terrifying. Which is probably why Steve Balmer is happy to pretend that, instead of threatening Microsoft’s core business model, Google’s Android strategy is just confusing:
“I don’t really understand their strategy…. Maybe somebody else does. If I went to my shareholder meeting, my analyst meeting and said, hey, we’ve just launched a new product that has no revenue model !….Yeah. Cheer for me. I’m not sure that my investors would take that very well. But that’s kind of what Google’s telling their investors about Android,” he said.
Well, that’s not really what Google is telling its investors about Android.  It’s not about generating a few hundred million dollars of revenue a year in license fees. It’s about getting the billions of people out there with mobile phones to do something relatively few are doing with them today — using the Web on their phones. And, perhaps, someday, getting them clicking on Google ads.
On Microsoft’s Windows Mobile phones, some 53% of people use the Web while it is 84 % on the Apple iPhone which has a better web browser. Google’s Android browser uses the same “Webkit” browser guts as the iPhone, with a different, less elegant user interface. But it’s still better than anything Microsoft offers. And Google could easily make improvements.
So, Google’s profit strategy is :
                Google is an advertising company with a massive search market share.
                Google wants to help create a big market in mobile advertising someday.
                For that to happen, more people need to use the mobile Web.
                For that to happen, people need to be able to buy better cellphones with better Web browsers. 
                With Android, Google could get more consumers using the mobile Web faster than Microsoft is with Windows Mobile.
Google is already dominating the mobile search market the same way it’s dominating Web search. Some 63% of U.S. mobile Web searchers use Google, versus 35% for Yahoo — and less for Microsoft.
Unlike Bill Gates,  Ballmer does not take enough of an interest in the products Microsoft makes. Bill Gates, who would do a detailed product review –  People were excited and terrified for product reviews with Bill Gates. Terrified because he could shred their weak products. Excited because he gave detailed feedback, making products better. Under Ballmer’s reign, a product review is less about reviewing the product and more about reviewing the business plan. Ballmer will ask who’s going to buy the product, how many will be sold, etc. That’s all well and good, but that’s not the sort of product review that makes great product developers even better.
Critics and business analysts had predicted that if Steve Balmer remain as Microsoft CEO and he still refuses to change his views on product against the competition and the growing usage of web based applications, Microsoft will continue to slide and sink.

I like the article written by Jason Kelly ( link below ) on a businessman perspective of how buying a Mac help the business and  why Microsoft will continue to lose its corporate market share . I do fully agree with his views ; personally I have exhorted users to convert to the Mac for a better user experience and my favorite quote to them  ” Once you use a Mac, you will never want to use a Windows PC anymore “. In just barely a month of using the Mac I was already a total convert.

http://seekingalpha.com/article/208686-apples-growing-corporate-market-share?source=email

Another interesting article about Steve Balmer’s ignorance :
http://tech.fortune.cnn.com/2010/06/07/steve-ballmer-doesn’t-get-it/