Microsoft's Shift in Focus

Microsoft (MSFT) once had a near monopoly on web browsers with Explorer, so it comes almost as a shock to find that the web browser most used to access my site, Bruceongames, is Firefox 3 and that even the undermarketed Chrome has made a significant impact. When it comes to search Google (GOOG) always had the majority of the market but MSN now seems to have slipped away to nearly nothing.

You can forgive the above because Microsoft, famously, misunderstood the internet so came to it late. Operating systems are different though, Microsoft has owned this sector since MSDOS. But even here there are massive cracks appearing. By far the fastest growing section of the PC industry is Netbooks. And the Linux derived Ubuntu has become a great success. Microsoft has fought back by bringing XP from the grave. But it is imposing stupid maximum system specifications that attempt to defy Moore’s law.

And of course its worst operating system problem is Vista. This has been the biggest train wreck in the history of Microsoft and it is rushing out Windows 7 to try and mitigate the disaster.

You might think that Microsoft owns the market for standard applications with the Office suite of programs that have swept all in front of them to become global standards. Even here, though, Microsoft is in big trouble from Google Docs which is free for most users and which massively reduces the IT costs for the many corporates that are now using it. Basically, Microsoft didn’t see the cloud coming.

So Microsoft is having problems in many of the most important areas that made the company great. But the reality was always that this was inevitable, you cannot hang on to monopolies for ever, especially in the fastest changing area of technology that the world has ever seen. And Microsoft must always have known this. Its monoplies will continue to fade away in the face of this change and new competition from aggressive competitors.

So it is against this background that the Xbox/Zune/Live project makes so much sense. The gaming industry is still at its very beginning. The future growth potential is very many times the current size of the market. So it will grow to be a far bigger market than the IT markets that Microsoft has monopolized for so long. In other words, Microsoft could become a bigger company because it will be in a bigger marketplace, as long as it has a significant market share.

So Microsoft is playing a long strategy in gaming (and it is growing to be a lot more than gaming). The company is building market position over successive generations of platforms, both hardware and software. And it is using its massive financial and intellectual resources to win.

Applying this strategy Microsoft must have been amazed that its main competitor, Sony (SNE), decided to make so many strategic and tactical mistakes and to basically throw away its market dominance. It must also be very pleased that Nintendo (NTDOY.PK) chose to remain in the “toy” end of the market and so did not build the infrastructure necessary to compete in the long term.

Microsoft is in the middle of one of the biggest shifts that any major corporation has ever made. From an IT company that did a bit of gaming to a consumer media company that does a bit of IT.

Disclosure: None

Comments

[jack dee:]

Great story.

But no facts to back it up. MSFT has 95% of the desktop market.


MSFT is doing stunningly well in IT. Five or six years ago punters and talking heads were still saying MSFT could not do back end servers etc. Today MSFT is raking in the cash as market share increases.

Office and Win is online and is one of the top five visted sites in the world.
Of course MSFT own 2 of the top five visted sites in the world but it does not make a good story so bloggers pretend not to know.



MSFT is having to put up with a media that loves to predict its decline about every 45 mins. Over the last 20 years people have claimed MSFT was on the way down , only to wake up the next day to hear MSFT earnings gain again.



(long goog msft and a host of others)

2008 Dec 01 12:33 PM

[Concerned C...:]

Bruce Everiss posting an article with no factual backup?

Evidently you're a first-time reader of his work.

Also, you would have to be doorknob-stupid to imply that Microsoft is giving up on the OS and IT markets in favor of growing its entertainment division. A company like Nintendo can afford to focus on just gaming. Microsoft would collapse under its own weight if it had to rely on just entertainment to keep it afloat.

2008 Dec 02 12:50 PM