Thursday, February 22, 2007

Microsoft vs. the world

posted by Andy Leff
Microsoft is having a terrible, horrible, no good, very bad day.

Google just released Google Apps, a cheaper, Web-based software suite backed by Google's clout, and perfectly positioned to dent Microsoft's monopolistic armor. The Bill Gates Behemoth also had to pony up $1.5 billion to Alcatel-Lucent SA for violating two digital music patents.

I never advocate kicking somebody when they're down, but I find these head-to-head challenges strangely satisfying. It's the age-old tale of David versus Goliath, the underdog taking all. And in light of recent behavior, Microsoft deserves every punch.

Consider the hubris of the Vista launch. The company slotted the product for a midnight release, presuming the masses would come in droves to pick up new operating systems. (Apparently, no one told customers that in Raleigh, N.C., when only 12 people showed up at an overstaffed CompUSA.)

The marketplace response has been similarly underwhelming. BusinessWeek reports:

During its first week on the market in late January and early February, U.S. retailers sold 59% fewer copies of Windows Vista than they did of Windows XP during its first week of sales in 2001, according to market researcher NPD Group. Dollar sales were down 32% compared with XP. In New York on Feb. 15, Microsoft CEO Steve Ballmer told financial analysts to temper their revenue forecasts from Vista during the company's 2008 fiscal year, which begins July 1, calling them 'over-optimistic'.

For all that, the system has created a ripple effect within the industry. Some ancillary firms are profiting by developing software patches that fix Vista's reported bugs and holes. Yet other companies, faced with the challenge of designing Vista-compatible applications, are bleeding cash. (And let's not even get into the recent death matches with Apple over advertising, Mac rip-offs, and Zune/iPod compatibility. That's another post.)

The takeaway remains the same: Microsoft is slowly but surely falling behind the times, and becoming more vulnerable. In this state, David can take down the most daunting Goliath if he hurls enough stones. Just watch for a few more days like today, and the software giant will be down for the count.

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