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.

One Response 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.

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