Microsoft is facing some very, very serious problems. The last 10 years have not been a financial success in terms of creating that ‘must have’ product. It is trying to be a little bit of everything. It is competing with Google with Bing, which is a financial disaster. It is trying to compete in the area of smartphones. It is trying to compete in the area of video games. It is competing against virtually every tech company out there. For the most part, with the exception of video games, it is being beaten. It has the next big chance to show it can meet the needs of consumers and attract business.
Already, we are starting to see some issues. Windows Phone, by all accounts, is a great product but it’s not selling all that well. And then you have Windows 8, which has had a lot of controversies. There are people who are complaining about the absence of the old Windows graphic format, the Start button and the rest. The combination of the touchscreen graphic interface and the traditional keyboard interface together has proven to be confusing. As of this morning [December 2], Windows 8 computer sales are 21 percent below what Windows computer sales were last year at this point. With the introduction of a new product, you probably expect something better. I think Windows is suffering from the overhang of the Vista problem, the operating system Microsoft introduced in 2007 that proved to be disaster, and people who switched over had a lot of trouble. The reviews of Windows 8 say there are problems—so it doesn’t surprise me that a lot of users are waiting.
You have the introduction of its tablet and the knock on is that it’s overpriced. When you are up against a monster like the iPad, you cannot come in and say ‘I will compete at the same level’. Companies like Amazon have come in with devices that they have decided are going to be loss leaders for a while, that they will lose money in order to obtain some market share. Microsoft is going in with a relatively high-priced product, a price you could buy an iPad with. And Microsoft doesn’t have that cachet that Apple has built up over the last few years.
The Last to Cool
It’s the same sort of problem that Microsoft has had for a long time. Its philosophy a decade ago, as CEO Steve Ballmer spelt it, was “the last to cool and first to profit”, meaning there was somebody else to introduce a product first and then Microsoft will use its greater financial power to develop real market once it comes in with its own version. That works when you are up against a bunch of financially struggling companies like Netscape. When you are up against companies like Google and Apple, it doesn’t work. Apple has demonstrated that ‘first to cool’ is the way to get dedicated market share. People who have already bought an iPad will not turn around and buy a Microsoft tablet. When you have an iPhone that interacts with an iPad that interacts with an iMac that interacts with a MacBook Pro, and once you are a customer in that circle, you are not going to bust out. They will remain Apple customers. So, Microsoft really doesn’t have an easy step here.
Think about it. What’s the most recent product that Apple introduced? iPad Mini. What has Microsoft introduced? Windows 8, server, games, an update of Bing…. It is trying to be everything to everybody, and the result is it is not really being anything to anybody. I think it’s a very challenging year for Microsoft and I also think it’s a make-or-break year for Steve Ballmer. He has been on the job for a decade. The stock price hasn’t moved. If this doesn’t work, it’s really time they take up somebody else who can do it.
You can never count Microsoft out. There is a possibility that Microsoft will turn things around. But, the problem is, in the past decade you could afford to stumble on first introduction. You had the ability to put something out there that still needed some work, some traction. Nowadays, when there are so many options—there are operating systems that are free, Google tried to get into the operating systems business—Microsoft can’t be a company that’s coming out with stuff and then say ‘Oh wait, we need to have a Start button, because people don’t like this’. It should be right off the bat. Apple is having its issues right now. But, you are not hearing customers say they are uncomfortable with its product and you are hearing a lot about customers being uncomfortable about Windows 8.
Somebody smarter than me was arguing that it might be smart to introduce an alternative, a Windows 8 Classic, meaning you get out of a pile of configurations and into the old visual interface of Windows. That’s a possibility. But look at the words we are using. Classic, old. Those are not the kind of words that will attract a lot people.
Too Many Distractions