Follow-up: Why the Future of Microsoft Doesn’t Appear Promising

New-Microsoft-Logo

Earlier this morning, I published a story about how the outlook for Microsoft looks rather dismal heading into the months and years ahead. Unfortunately, it was sloppy journalism. I’ll admit that. I’m a college student that occasionally writes on the fly, so sometimes my opinions get mashed into an indecent article with inadequate factual information to back up my points. So, if you will allow me, I will give it another shot.

Let me begin with the decline of the PC market, highlighted by plummeting sales and shrinking profit margins. Most analysts predict that the situation is only going to get worse, simply because PCs are becoming too good these days for consumers to merit an upgrade. Moreover, traditional PC sales are being hindered by the increasing market share of Macs and gradual shift towards the adoption of tablets over full-sized laptops. 

Apple has experienced year-over-year growth, thanks to strong Mac sales; other PC makers have endured a modest decline in shipments.

Apple has experienced year-over-year growth, thanks to strong Mac sales; other PC makers have endured a modest decline in shipments. (Source: Gartner)

While the decline of PC sales hurts laptop manufacturers — Asus, HP, Dell, and the likes — they aren’t the only ones that suffer from this problem. Microsoft, as a predominantly software-oriented company, supplies these OEMs with licensing agreements for its widely adopted Windows operating system. With less PC sales, Microsoft is providing less licenses and, subsequently, has less market share. Never a good sign.

Moreover, the netbook has been officially declared as dead. Market research firm iSuppli claims that netbook sales will see a sharp drop from 14.13 million shipments last year to a mere 3.97 million in 2013, a marked 72 percent decline year-over-year. Even worse, netbook shipments are only expected to reach just over a quarter million next year, on pace to ultimately hit a virtual goose egg by 2015. That’s the nice way of saying zero.

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Netbook shipments are expected to experience a catastrophic drop over the next few years, after peaking at over 32 million in 2010. (Source: IHS iSuppli)

The transition towards tablets, and mobile devices in general, wouldn’t necessarily be so daunting for Microsoft if it had competitive products to bring to the table. Instead, the Redmond-based corporation has made a bleak attempt at tackling the iPad with its Surface tablet, released last October to little fanfare. Since then, sales of the Surface have reportedly been abysmal. In early January, it was reported that fourth quarter Surface shipments amounted to just 900,000 units.

Microsoft's attempt at tackling the tablet industry with the Surface, pictured above, has been largely unsuccessful.

Microsoft’s attempt at tackling the tablet industry with the Surface, pictured above, has been largely unsuccessful.

While its expensive price tag, obnoxious advertising campaign, limited app ecosystem, and various hardware problems have contributed to below-average Surface sales, Microsoft could be facing difficulties in moving the tablet because of poor brand perception. Simply put, Microsoft it not nearly as cool as Apple and Samsung currently are. While it might sound like I’m part of some high school clique, the underlying point I make is based in truth.

Think about it this way: every year, millions of consumers in the United States and worldwide flock to their local Apple retail store to stand in line for hours, just to get their hands on the latest iPhone, iPad or whatever new product the Cupertino-based corporation has launched. All of Microsoft’s hardware launches — sans the Xbox 360, which is part of an entirely different market segment — garner virtually no attention in comparison.

Apple retail stores are routinely packed with consumers of all ages, vying to get their hands on the latest Macs, iPhones, iPads and iPods.

Apple retail stores are routinely packed with consumers of all ages, vying to get their hands on the latest Macs, iPhones, iPads and iPods.

All of this might seem trivial, but sales and the associated revenue is all that matters at the end of the day. You could certainly buy into the stereotype that every single person you can think of buys a Mac, iPhone, iPad or so forth just because it has the Apple logo on it, almost in a sheepish manner, but Tim Cook and company certainly aren’t complaining. Apple has great brand recognition, great brand loyalty, and great brand perception.

Windows-Phone-8While on the subject of unsuccessful mobile ventures for Microsoft, I might as well point my fingers at Windows Phone. Yes, sales of the devices actually weren’t that bad at an estimated four million-plus units during this past holiday shopping season. A large portion of those sales can be attributed to the flagship Lumia 920 smartphone in partnership with Finnish handset maker Nokia.

But, unfortunately for Microsoft, the smartphone market remains dominated by the iPhone and Android-powered smartphones. At last check, iOS and Android combined accounted for an incredible 92 percent market share among mobile operating system usage in the United States. When you’re left with only 8 percent of the market to play with, and you’re sharing that segment with emerging BlackBerry 10 devices, it’s clearly not the most ideal situation that you could draw up.

While its Windows operating system might still have tremendous market share, and the company is still extremely successful in the enterprise, all of the negative factors outlined above could contribute to a bumpy road ahead for Microsoft. Perhaps the Redmond-based corporation should start from the top, and seriously evaluate how effective Steve Ballmer has been in his chief executive position at Microsoft. After all, he is highly-regarded as the worst CEO of any major corporation in the United States.

As always, that’s just my two cents. In the world of the Internet, flame wars can often erupt when arguments are made between competing tech companies and platforms. iOS and Android. Apple and Microsoft. Apple and Samsung. Everyone is entitled to their opinion, and I’m interested in hearing what yours is. We’ve already heard some interesting responses in the original comments, and I encourage others to chime in. How do you think Microsoft will fare in the months and years ahead?

Post a response / What do you think?