Microsoft-Watchers See A Company In Decline

How much trouble is Windows in? Microsoft-watchers say the company's fortunes have turned.

Gina Smith, Contributor

July 26, 2011

6 Min Read

Today at BYTE it wasn't all Google+, Apple OS X Lion and Ubuntu talk. Rather, we've been debating a question that--in all my years covering tech, beginning as a beat reporter on Microsoft--was one I thought I'd never hear.

Is Windows dying? And then, riffing off of that, the discussion moved to the Windows Phone 7 update code-named Mango, due this fall.

And then it migrated to the fate of Microsoft in general, given the steady erosion of Redmond's influence in a now tablet- and mobile-focused world.

Predictions on all fronts were dour. I spoke to some of our staffers, many of whom are high-level IT folks. I also contacted some Microsoft experts (known as Microsoft MVPs) close to the company. No one had high hopes for Microsoft gaining ground in any of these areas.

It's strange. Back in 1989, I covered the posh launch event in NYC where Microsoft unveiled its buggy Windows 3.0. Then CEO Bill Gates was exultant at the announcement, grinning as he unveiled the new graphical user interface at the Windows of the World Restaurant.

I spoke to Gates' mother that night, who told me, I'll never forget, "this is the happiest day of Bill’s life."

With the recent reports about the stalling sales of Windows, he's got to be pacing in that underground cave of a mansion of his.

Image Courtesy Matthew Guay -- techinch

But Microsoft Windows dying? For those of us who remember, there was a time when Microsoft and its Windows could do no wrong. Every bug was a feature. There were fanboys, too. Writing a critical thing about Windows was enough to get hate emails from the too-faithful users.

Microsoft was the Apple of the 1980's and 1990's in this respect. We journalists often criticized Microsoft for not keeping a Chinese wall between its applications and OS divisions, and for the perceived "evil" it showed by buying up or duplicating third-party add-ins in new versions of Windows.

That behavior seems innocent now, doesn't it? We so viciously took on Microsoft's Bob, Microsoft's attempt to make computing simple via a simplistic help avatar. Man, how we ridiculed it.

But Windows dying? I can't believe I've lived long enough to see such talk.

According to analysts and Microsoft's own financial reporting, earnings were better than expected, but Microsoft last week reported disappointing Windows sales for the third quarter in a row. Not a good sign. Not the Microsoft we once thought couldn’t lose, no matter how great, good, mediocre or bad its products were. And they did run the gamut.

Three sources close to the company, who asked not to be identified, told me Microsoft is desperately looking for ways to extend its brand into mobile--phones and tablet--where so far it has been unable to provide a product that really works well.

Execs at Microsoft, sources say, simply did not foresee the threat of Android and iOS based phones and tablets. Given Microsoft's tendency to lean toward the arrogant and sometimes the myopic, this doesn't surprise me. In the first edition of Gates' 1995 book ,The Road Ahead, Gates made scant if any mention of the Internet, even as Netscape and other players were recording record-high IPOs and prosumers were going online in droves.

Jarred awake, Microsoft is now working with Intel and Motorola on a smart, ARM chipset-based docking station for tablets that, upon insertion, would automatically switch operating systems from Android to Windows 8, sources say.

The concept isn't new. Earlier this year at CES in Las Vegas, BYTE and the TechWebTV team spotted a prototype system from Lenovo that could toggle back and forth between Android and Windows 7 at the flick of a switch. The system looked like a notebook. But in reality, the notebook's clamshell was actually a dock and the LCD display was really a tablet that could be snapped in and out of the "dock" (watch the video on YouTube or view it below).

In terms of the tablet and dock being co-developed by Wintel and Motorola, sources told BYTE that the act of docking would automatically engage the Windows 8 mobile UI that Microsoft has been recently showing off to the press. This could be a save for the Wintel duo. Not a slam-dunk, but a save.

"Everyone's looking at Microsoft and trying to figure out how on Earth it can extend its franchise moving forward in a tablet-based world," one source close to the company said. Quoted in Reuters , tech analyst Josh Olson from Edward Jones, called Microsoft "a show me story." And so it is.

If anyone can put on a show, it is Microsoft. The company's newest update to Windows Phone 7, codenamed Mango, went gold this week. Most developers I know saw it as a huge catch-up step in the right direction. Due this fall, Mango includes hundreds of new features and finally does what its competition does and even exceeds its rivals in some facets.

But Mango is also scheduled to come out in September, the same month as the next Apple iPhone, I am hearing. Just as Microsoft once drowned out the competition with its big releases, the reverse will likely be true in September. Payback is hell.

Will Microsoft’s multi-billion dollar bet in Nokia make much of a difference? Many watchers say yes, this could pay off. Also, the many lawsuits Google is facing with Android and the lawsuits iOS developers are facing via Lodsys for in-app purchases bode oddly well for Microsoft. This situation could force more users to the Windows Phone platform.

Microsoft is wise to target enterprises with its phone strategies, as it shows all signs of doing. Enterprises, disenchanted with the RIM BlackBerry and fearful of security issues with Android-based devices, could find Windows Phone 7 and Mango devices to be the next best thing.

Microsoft has announced that Mango includes features that will be attractive to the IT set, including support for MS Skydrive and true integration with Internet Explorer 9 and Office 365. Still, developers must find the platform an easy and affordable platform. I hosted the recent SF Appshow, where several app companies showed their plans for releasing apps this summer and fall. None had developed apps for Windows Phone 7. Why? Because they are too busy and cash-strapped to get beyond their current iOS and Android development plans.

So Microsoft has come full circle. There was a time when developers, forced to choose between Windows and the Mac, always chose Windows. Microsoft had most of the market and was able to keep it because cross-platform development in a largely non-portable world was too expensive for most startups. That was long ago. Fast forward. The shoe is suddenly on the other foot.

Sign of the times
Still, this is Microsoft, remember, with wads of cash in the bank. As we saw with Nokia, Microsoft can afford to buy its way into any market and has much experience doing so. Don't count Microsoft down and out just yet. Just down, maybe.

My bet is that somewhere, Microsoft CEO Steve Ballmer is shouting at someone trying to get answers on how a company like his ended up in a place like this.

I'll be closely following Microsoft for BYTE this summer, running up to the fall launch of Mango and later, Windows 8. As of this column's publication time, Microsoft was unavailable for comment.

Gina Smith is editor-in-chief of BYTE. Follow her @ginasmith or GinaSmith on Google+ Email her at [email protected]. She still has her original copy of Windows 3.0--in shrinkwrap.

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