Is Microsoft a Dead Man Walking?

Rumors of its death are greatly exaggerated.

An article by Adam Hartung in Forbes today paints a pretty bleak picture for Microsoft. Basically, Hartung looks at the past quarter and holiday season to conclude that Windows 8 has been a dismal failure, the Microsoft Surface accounted for only something like 5% of tablet sales, and PC sales continue to decline. Hartung reasons that Steve Ballmer's "bet the company" gamble is a loser and Microsoft is done.

While I can't argue with Hartung's numbers, I do think they need to be taken in context. First, let's look at the tablet numbers. Yes, Surface has not overtaken iPad, not even close. For that matter, it hasn't even bested Kindle or Android tablets. But, really now, did you think in just a few short months it would? I doubt even Microsoft's most optimistic projections had it overtaking any of these competitors in just one holiday season.

Also remember that the Surface is not just a consumer-oriented device, like some of the other tablets mentioned. The Pro version is an outright laptop replacement aimed at the enterprise. Did you expect Fortune 100 companies to go out and buy Surface Pro tablets as Christmas presents to their employees? No, enterprise devices will be bought in regular buying cycles and rarely in the first quarter that a device comes out. As executives get their heads around BYOD and some decide that company-owned devices are safer, the Surface Pro will look like a better option with its enterprise control and security features.

Just as Android tablets cover a wide range of hardware manufacturers, let's not forget that Surface is not the only Win 8 tablet either. No, there are a lot of companies selling Win 8 tablets and hybrid devices. Small companies like HP, Dell and Lenovo, for instance. These three are not alone either, dozens of others are as well. Not to mention idea books, ultra books, etc. In fact, when you look at Microsoft's strategy, which other OS maker has one OS that covers everything from servers to desktop to tablets and phones? With large distribution and hardware vendors lined up at each level?

What would Hartung have Microsoft do, throw in the towel in the tablet market after a few weeks, a la HP and the Touchpad? No, Microsoft is in this one for the long haul and will be willing to slowly build market share. 

But let's look at the rest of Microsoft's business as well. Do you remember when the Xbox first came out? Many said the same thing about Microsoft's foray into video game consoles that they are saying about tablets. How would it compete with Sony and Nintendo? Well, Xbox has become a cash cow for Microsoft. Rumors are that the Xbox 720 will give profits a boost in the near future.

Also, those Xbox consoles are a Trojan Horse into the living rooms of consumers. Today's Xbox does much more than play video games. It is an internet-connected media center. Playing movies via Netflix or Amazon, online games and shopping, DVDs. With advanced Kinnect technology, Microsoft has a leg up in the ultimate prize of controlling consumers' TV experience.

Besides the OS, what about applications? Microsoft Office for the all the talk about Google Docs, still has a lion's share of the business application market. They are coming out with versions for iOS and Android. While it may not capture the market share that it commanded on the desktop, it will still be a leader.

In the cloud, Microsoft's Azure has made great strides. Running Linux and non-Microsoft apps has outflanked some of its competitors. As we move from an IaaS-dominant cloud provider to PaaS, Microsoft is well-situated to command a top-three market presence in this market as well.

In fact, Microsoft is well situated to be a top-three contender in so many lucrative markets that it would be foolish to write this company off. My friend Brad Feld used to tell me that if you are going to play in a market you need to be a top-three player in your market. If you are not top three, don't bother. Well, there is no reason Microsoft won't be top three in every market they play in. Don't forget they play in big markets too. Top three is a big number.

No, we won't see the same Bill Gates Microsoft as the evil empire with 90+% market share. But we will see Microsoft as a player in a wide variety of markets and a more nimble and able competitor across the board. So, in the words of Mark Twain, rumors of Microsoft's death are greatly exaggerated.

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