If KFC Was Handing Out Free Double Downs, Would You Go to Popeye's?
Sounds like a silly question, right?
The problem is simple - Google is handing out free Double Downs, and Microsoft's chicken tastes good, but still costs money.
Just today, we learned the details regarding the City of Los Angeles' decision to switch to Google's Gmail, Docs, and Calendar applications.
The reasoning was obvious - LA needs to save money, and Google allows them to quickly deploy an effective solution that will save on both money and man hours.
The cloud-computing revolution is an awful trend for companies like Microsoft. Consumers used to have to pay to get decent software, but those days are over.
So far today, I've used the following cloud applications:
-Google Webmaster Tools
These are all incredible Apps, and they are all 100% free. So like many consumers, I am now conditioned to expect great stuff for free. I will now only pay for software that:
1) fulfills an important need that can't be satisfied with the free stuff
2) is highly differentiated.
Office no longer into these categories, and will be in bigger trouble when online spreadsheets and presentation apps improve.
The enterprise is equally problematic. Google's (and others') solutions are driving down the price for software, and the adoption of cloud apps by companies like Genentech (Private:DNA) and Motorola (MOT) is effectively social proof for those considering a switch to the cloud.
New competition is bad simply because it exists.
New competition is even worse when it's free.
New competition is devastating when it's free and good.
My conclusion is simple: sell Microsoft now.
Disclosure: Long AAPL, short MOT