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The Decline of Microsoft: Is There Hope?

Posted by Morgan Sims on March 25th, 2014 at 11:33 am

In December 1999, Microsoft’s stockmarket value reached $616.34 billion, making it the richest company North America had ever seen. Yet in 2000, founder Bill Gates handed over the reins to his college dorm-mate Steve Ballmer and the tech giant began to slide. Today, it’s the 41st largest company in the world, with a market value of $234.8 billion. That’s nothing to sneeze at, but a long way short of its dizzying highs. With Steve Ballmer’s decision to step down late last year, it’s worth considering where Microsoft went wrong, and whether there’s hope for this former tech force.

Windows Phone Flops

Image via Flickr by mbiebusch

Microsoft’s success was tied to the personal computer, and this device not so coincidentally hit its peak around 2000. Many suggest this shift to mobile technology, rather than the change of leadership, was what most damaged Microsoft.
It attempted to adapt with the release of the first Windows Phone in October 2010, but by that time, the iPhone had already been around for three years and become a consumer favorite. The Windows Phone was also released in the same year Apple launched its iPad, which seemed like something much more innovative than Microsoft’s latest release.

During the first three months of 2012, Microsoft’s Windows Phone platform accounted for just two percent of the American smartphone market. Even its tired Windows Mobile platform had a market share more than double that.
The system itself doesn’t seem to be the problem, with devotees raving about its intuitive, user-friendly design. Instead, experts suggest that the Windows Phone was simply launched at the wrong time, with the wrong carrier partners. It also pointed to confusing marketing campaigns and the relatively limited range of available apps as reasons behind the flop.

Windows 8 Misfires

Image via Flickr by Lord of the Wings

If there was one thing Microsoft knew how to design, it was an interface. Until, of course, the spectacular failure of Windows 8. The touch-optimized design was created with tablet users in mind, but even they didn’t seem to warm to the system. They rejected the removal of the familiar “Start” menu and said navigation was too confusing. Even Microsoft itself conceded the operating system was a misfire, and the numbers supported its admission.

When Windows 7 was released in October 2009, it took a few months for it to achieve 10 percent market share. It neared 20 percent of the market a year after its release. Growth was significantly slower for Windows 8, released in August 2012. It took more than six months to secure five percent of the market. A year after its release, it still hadn’t captured 10 percent of users. By December 2013, the outdated Windows 7 actually had more than four times the market growth of Windows 8.

Xbox One Off to a Slow Start

Image via Flickr by Mack Male

The other piece of the Microsoft puzzle is its gaming console and Steve Balmer's baby, the Xbox. Microsoft strategically released it on November 22, 2013, a week after Sony’s PlayStation 4 hit the United States, and a week before it hit Europe. It’s still too early to tell, but the latest Xbox seems to be on the back foot.

In December and January, Sony sold roughly twice as many new game consoles as Microsoft. These figures were particularly impressive considering that the PlayStation 4 hadn’t yet hit its native Japan, and it faced some supply constraints in parts of North America. The gap narrowed in February, but PlayStation still had the edge. Many suggest the Xbox One will always trail its competition while it costs $100 more.

Is There Hope for the Future?

Image via Flickr by Robert Scoble

With a string of misfires and miscalculations, it’s easy to suggest that Microsoft’s future is bleak, but that may be too simplistic a view. Stave Ballmer will vacate the CEO’s chair Microsoft within the year, and his resignation leaves the door open for a new vision and a fresh start. As the popular saying goes, where there’s life, there’s hope. Microsoft will need to look to the future instead of dwelling on the past and its love of PCs to succeed, but it certainly has the credentials to claw its way back.

It’s easy to point fingers at Bill Gates and Steve Ballmer for Microsoft’s decline, but rather than assigning blame for the past perhaps it’s better for the company and its fans to look ahead.

4 Responses to “The Decline of Microsoft: Is There Hope?”

  1. Eli Cummings says:

    Hope ? Since when did consumers of products hope corporations survive? And why should Microsoft continue as a large player in the tech space ? Are corporations now the new focus of "religious" attitudes ?

    All companies eventually decline. It is inevitable. They are empires of a sort in what we have come to call the consumer space (which has dynamics that are no different than the geographic space of nation states and empires).

    No one should bemoan their decline, focus instead of the new growth that feeds on their decomposition.

    Environments change and organisms fail to adapt. Corporate entities are no different.
    Any intro to economics course teaches the fundamental principle that the environment is something the firm can't control but must adapt to or die.

    This does not mean of course that people's lives are not disrupted or even ruined by such changes but let's not lose perspective here. We are not talking about famine, pestilence, disease and violence which continue to run rampant across the world with millions dying every day.

    Analyze Microsoft as a business entity ? Fine. Leave the sentimentality of "hope" out of it.

  2. T Mijnssen says:

    Microsoft overplayed their hand. Years of lack of competition, coupled to fat profits built a company culture of arrogance and complacency.

    Payback time is arriving. Google and Apple are hitting Microsoft where it hurts... in their core business of selling software, by giving it away virtually free.

    Microsoft's response is more of the same, trying to force consumers and corporations to spend. Which will only drive away more potential customers.

    An example in the consumer domain.
    Onedrive works for Windows Vista but no XP support. How to get ride of your customer when 25+% of machines still use these OSs. Google does not make such serious mistakes.
    Windows Phone has PC support through a dedicated app which is only available for Windows 7 and later... where are Vista and XP?

    An example in the corporate field.
    Company S (no to mention names) with 40.000+ employees is under pressure in the electronic manufacturing industry... Cost down is the answer. All Microsoft PCs are phased out to be replaced by Google docs on portable Andriod equipment. Cost savings in the millions. End of Microsoft.

    This demonstrates a Mircosoft company culture. And of all the things for a turnaround to happen it is the most difficult to cure... and by far. Nokia in mobile phones is a good recent example. It has long been known you dont turn around a car factory, you build a new one with new people somewhere else.

    So does Microsoft have a future?
    Perhaps but it will not be a 600B$ business. They will need to buy back what they have lost by giving it away to keep their legacy market on board. (You do not invest in technology/equipment to find out it is made obsolete by Microsoft's marketing).

    Western Markets (saturated)
    For the PC segment it better run on existing equipment because a 3 year cycle has become more like 6 to 10 years one. For Windows Phone it will be the same.

    For Eastern Markets (growing)
    Low cost Microsoft and the equipment cycle is long after saturation.

    Microsoft can then only hope that customers will spend money on the "what comes on top"...Games and business apps like Outlook etc. Try to get some revenue from advertising when Google is way ahead. The Cloud does not look like big business either with people and companies wary because of privacy concerns and international privacy laws.

    It does not look glorious. And the Microsoft cost cutting has started. Which does not bring out the best in your humain resources.

    Get some real business development/marketing Microsoft (fix your company culture) Windows 9 is probably your last chance.

  3. Joe Tanto says:

    Microsoft is no longer the Colossus it used to be because we are now in the post PC era. Apple helped bring about this new era in computing with its iPad and iPhone. Google continued the push away from PCs to alternate devices as well. Even Microsoft has made a petty attempt to adapt itself to the post PC era introducing its own Tablets and Windows based smart phones, they are way behind Apple and Google these days.

    Microsoft was king during the era when you needed a PC to connect to the internet, now these days, Tablets and Smartphones offer virtually the same thing. They are getting more and more advanced.

    Microsoft also has a history of arrogance and introducing highly flawed products to its customers. Windows Vista was insanely expensive and over priced for an OS. Compared to XP it was very unstable. Microsoft dropped the ball again with Windows 8 which has been universally panned.

    I think if Bill Gates made a return to the company similar to the way Steve Jobs returned to Apple during his final years, Microsoft could make a major comeback but I think the competition has become too entrenched. Right now its pretty much Apple vs Google in the post PC era.

  4. Seth says:

    There are many people who see the PC or Mac as the first and top choice in computing, I understand that Android, IOS etc. are popular for the convenience, and have taken the leading share of the market for that reason, but if you want raw power, as many industries, designers and gamers require there is no real alternative to a PC or Mac. For that reason calling this the 'post PC era' is a tad ignorant of the facts.

    Steve Ballmer is not the reason Vista and Windows 8 failed, The reason they failed is because Microsoft with it's well known Arrogance pushed two poorly planned and tested products on it's now 'suspecting' users, and every time they do this, Apple and other companies take up the slack.
    Microsoft are far from dead, they just need to create an intuitive, User Friendly, (the day i got my Vista system i wanted to throw it through the window), hybrid operating system and they will be gunning with the big boys once more!

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