TECH ARTICLE

Microsoft is a dying consumer brand

Consumers have turned their backs on Microsoft. A company that once symbolized the future is now living in the past.

Microsoft has been late to the game in crucial modern technologies like mobile, search, media, gaming and tablets. It has even fallen behind in Web browsing, a market it once ruled with an iron fist.

Outgoing Chief Software Architect Ray Ozzie called out Microsoft's lost ground in a blog post over the weekend.

"Our early and clear vision notwithstanding, competitors' execution has surpassed our own in mobile experiences, in the seamless fusion of hardware & software & services, and in social networking & myriad new forms of internet-centric social interaction," he said.

It's not like Microsoft didn't foresee the changes ahead. With a staff of almost 90,000, the company has many of the tech world's smartest minds on its payroll, and has incubated projects in a wide range of fields that later took off. Experiments like Courier (tablets), HailStorm/Passport (digital identity), and Windows Media Center (content in the cloud) show the company was ahead of the game in many areas -- but then it either failed to bring those products to market, or didn't execute.

Some influential analysts think not. Several have downgraded Microsoft's stock in recent weeks, as PC sales continue to slow and Microsoft struggles with its tablet strategy. The company's stock is down more than 17% this year.

What's wrong with Microsoft

A rundown of Microsoft's major consumer projects finds trouble in almost all of them.

Internet Explorer's popularity has been waning for years, and one recent study showed that for the first time in more than a decade, more people are using alternative browsers. The browser is becoming the single most critical piece of software on a device -- potentially eclipsing the operating system -- but all of the major innovations of the past few years, like tabbed browsing and add-on extensions, came from outside Microsoft.

Windows Phone 7 has promise, but Microsoft dug itself an enormous hole with the subpar Windows Mobile platform. With its market share currently sitting below 5%, developers are taking a "wait and see" approach.

Microsoft's media platform Zune was dead on arrival.
Bing is growing, but substantially all of that growth has come at the expense of its business partner, Yahoo -- not its archrival Google.
Microsoft's attempts to build a social network through Windows Live have failed to gain traction. It has no real answer to Facebook.

Six months after Apple's release of the iPad, Microsoft still has virtually no presence in the tablet market. And its strategy for taking on Apple -- Windows 7 on a tablet, rather than a tablet-specific operating system -- is leaving potential partners cold. Lenovo's technology director recently told PC Mag that his company won't be building around the platform: "The challenge with Windows 7 is that it's based on the same paradigm as 1985 -- it's really an interface that's optimized for a mouse and keyboard."

With Xbox, Microsoft succeeded at innovating: It created a competitive video game brand for hardcore gamers. But even Xbox was outdueled by Nintendo with the Wii, which outsold Xbox by appealing to casual gamers.
Then there's the epicenter of the Microsoft universe: Windows. Microsoft likes to point out that its operating system is its biggest consumer brand and Windows 7 has been selling rapidly. Its new version has sold 240 million licenses in a year, making it the fastest-selling OS in Microsoft's history.
But Windows' momentum isn't from consumers. In fact, consumers are a worry for the Windows division, because they have dramatically slowed their purchases of PCs in recent months.
Rather, the fast sales are coming from businesses, which significantly delayed their purchases of new Windows licenses because Windows Vista was bug-ridden mess. Then the recession hit. A years-overdue corporate PC refresh cycle is now happening all at once.

Meanwhile, Microsoft's executive suite is in turmoil. CFO Chris Liddel, entertainment unit head Robbie Bach, device design leader J Allard and business division chief Stephen Elop have left within the past year. Ray Ozzie joined the exit parade last week.

Consumers matter

As Apple has proven, success in consumer products can fuel explosive growth. Apple surpassed Microsoft's market value earlier this year, and is on pace to eclipse the company in sales for 2010.

And if Microsoft cedes consumer ground, it risks its enterprise stronghold. Businesses are becoming more willing to allow employees to use their personal devices for work purposes, and a growing number of those gizmos are Macs, iPads, iPhones and Android smartphones.

So it's up to Microsoft to turn that around by being a leader, rather than a follower, in the consumer market.
Windows Phone 7 is a good start. Internet Explorer 9 has some exciting new features that other browsers lack. And Xbox's controllerless Kinect -- the first of its kind -- is coming this holiday season.

Microsoft just has to hope it's not too late.