(1) 10 Things Microsoft Did Right over the Past Decade, (2) Microsoft's 2010 Will Rely on Windows 7 Sales, Yahoo Deal, Cloud

(1)10 Things Microsoft Did Right over the Past Decade

News Analysis: Microsoft had an interesting decade. The company made some mistakes, but it also did some things right that helped it maintain its position as one of the world's largest software companies and a top influencer in the global IT industry. We take a look at those 10 things Microsoft did right over the past 10 years.

Although Microsoft made some mistakes over the past 10 years that adversely affected the company's position in the industry, the software giant has also done a lot of things right. Over the past 10 years, Microsoft has been able to maintain its position as the dominant software developer in the world. It has also stayed relevant both in the consumer space and the enterprise. That's a feat that few companies have been able to achieve.

Perhaps that's why discussions surrounding Microsoft and Windows are so heated today. Although many like to rail against Redmond, it keeps coming back stronger. With each bit of adversity, it seems that somehow, in some way, Microsoft is able to overcome the problem and offer something to customers that appeals to their desire. Of course, it hasn't succeeded every time. And the past decade has shown that Microsoft needs to be more diligent in its decision making. But the company has also done a number of things right that it can use as a foundation for all the future decisions it will make. Let's take a look.

indows Vista was a nightmare for Microsoft. Consumers hated it. The enterprise wouldn't even adopt it. And vendors, once the partners that did Microsoft's bidding, were forced to offer downgrade rights to customers that wanted to run Windows XP. Microsoft knew it had to do something to repair the damage that Vista caused, so it quickly released Windows 7. Microsoft's latest operating system is everything Windows Vista should have been. It's innovative. It's far more secure than previous versions of the operating system. And it appeals to customers. It's a great comeback product.

2. The move to Bing

Microsoft was in deep trouble toward the latter part of the decade. Although it commanded the software market, Google was cornering the search space without any worry of competition. Microsoft's Live Search was largely inconsequential. But rather than wave the white flag, Microsoft released Bing. Microsoft's latest search tool is outstanding. Its results match Google's search results. And thanks to some extras, like a visual search feature, it's a fine alternative to anything Google is offering up.

3. Get in on the gaming

When Microsoft first announced that it would break into the gaming space, some wondered if it could make it. As 2009 gives way to 2010, that question has been answered with a resounding affirmation that yes, indeed, Microsoft can take the gaming industry by storm. Over the past decade, Microsoft has turned its Xbox platform from the "other" console on the market into a gaming leader. The Xbox 360 is now even more popular than Sony's PlayStation 3. That's no small feat. And it should be commended.

4. The enterprise focus

As Apple and Google turned to the consumer over the past decade, Microsoft stayed true to its base—the enterprise. Windows is still the dominant force in the business world. Microsoft has so firmly cemented its position there that most companies wouldn't even consider deploying any other software. Going forward, Microsoft has almost ensured that the enterprise will be its playground.

5. Marginalizing Mac OS X

Apple's Mac OS X made significant strides over the past 10 years, but it's important to note that its rise in the market was largely inconsequential to Microsoft's bottom line. Through smart strategies and partnering with third parties, as well as vendors, Microsoft did a fine job of limiting the impact Mac OS X's rise really had on Windows. Did Apple's operating system steal market share away from Windows? Sure. But did it really change the OS market? No way. Microsoft is still on top by a wide margin.

6. Keeping Linux away

Some would argue that Linux is the operating system that more people should use. After all, most distributions are safe, they are generally lightweight and many are free. But the past 10 years haven't helped Linux gain a substantial footing in the OS market. I would argue that Linux is more well known than it was in 2000, but to say it is any more appealing to the mainstream is a bit of a stretch, even though more distributions have become user-friendly. That can be mainly attributed to Microsoft's ability to keep the OS at arm's length. Simply put, Redmond didn't allow the Linux craze to get out of hand. It was a smart move.

7. Addressing the Web

For too long during the past 10 years, Microsoft allowed Google and others to innovate on the Web. It might also be argued that the company has yet to do enough to stop Google's rise in that space. But over the past year or two, Microsoft has done a better job of realizing that the Internet is the future and it had better be in a position to capitalize on it. That's most evident in its acquisition of several online sites, as well as the launch of Bing and Bing Maps. Microsoft is getting ready to focus on the Web in the new decade.

8. The smooth transition

When Bill Gates announced that he would be stepping down from day-to-day activities at Microsoft, it sent shock waves through the industry. Bill Gates was the face of Microsoft. Investors placed millions of dollars in Microsoft stock because of their faith in its co-founder. It was a dicey situation. But Microsoft handled the transition of day-to-day activities from Gates to Steve Ballmer, the company's CEO, with aplomb. It made Ballmer a more vocal evangelist of the brand, while limiting Gates' influence. It reassured investors. It also proved that Ballmer was up for the job. Kudos, Microsoft. It could have been much worse.

9. Maintaining profitability

Being an extremely profitable company over a period of 10 years isn't always easy. In the tech industry, things change so rapidly that companies can be dominating a market one year and wondering why all the cash dried up the next—just ask Sony. But Microsoft maintained strong profitability numbers throughout the past 10 years. Today, Microsoft still earns billions of dollars of profit each year. And all that cash is being socked away for big acquisitions or investments the company might need to make in the new decade.

10. Cornering the netbook market

Although it failed to see the writing on the wall in so many markets over the past 10 years, Microsoft made one big move that will substantially improve its chances of maintaining profitability into the next decade: It cornered the netbook market. At first, netbooks ran Linux. But in a very short time, Microsoft was able to steal netbook-OS market share away from Linux to such a degree that today, it's in a dominant position in that space. That's no small feat. Netbook popularity has grown rapidly over the past year. Most analysts believe that that growth will continue. By solidifying its position with netbooks, Microsoft is positioned to profit heavily off those lightweight PCs.


(2)Microsoft's 2010 Will Rely on Windows 7 Sales, Yahoo Deal, Cloud

News Analysis: Microsoft underwent substantial challenges in 2009, few of which it will alleviate in 2010. However, a stronger economy could translate into increased sales, reversing its revenue decline, and some products launched in 2009 will likely continue their strong adoption trend. Areas such as cloud computing pose the chance for Microsoft to bolster its market share in the enterprise, but the company will likely find itself in critical shape in other areas, notably the smartphone space.

With declining revenues and robust competition in many of its product areas, 2009 was not exactly a banner year in Microsoft’s history. Will 2010 be any better? Redmond can certainly look toward a few bright spots: Both Windows 7 and Bing, its search engine, experienced disaster-free launches followed by solid early adoption rates, which could translate into greater success in the coming year.

However, Microsoft also faces substantial challenges. Despite a search-and-advertising partnership deal with Yahoo that could see Bing’s market share nearly triple, Google remains the dominant force in online search. Microsoft’s mobile division remains weak and is faced with substantial competition from the likes of Apple and RIM. And if the economy doesn’t pick up, then there’ll be no rising PC sales to buoy sales of Microsoft software.

So how will 2010 fare? The following traces out Microsoft’s prospects in certain key areas.

Microsoft-Yahoo Deal Goes into Effect, Presenting Bigger Google Challenge

Microsoft poured millions of marketing and development dollars into Bing, its search engine that launched in June 2009, but the biggest increase to its market share in 2010 will likely come courtesy of the search-and-advertising agreement struck between Microsoft CEO Steve Ballmer and Yahoo CEO Carol Bartz.

On July 29, Microsoft and Yahoo jointly announced a 10-year partnership that would see Bing powering search on Yahoo’s sites, while Yahoo assumed exclusive worldwide sales duties for both companies’ search advertisers. The deal is expected by both parties to be cleared by antitrust regulators and should go into effect in 2010.

When that happens, assuming that Yahoo’s market share ports over to Bing’s with a minimum of attrition, Microsoft’s share of the U.S. search-engine market could rise to close to 30 percent. Google continues to occupy roughly 70 percent of that market, so even a more robust Bing won’t present a survival threat. Nonetheless, 2010 will likely be the year where the world of online search narrows down to two engines whaling at each other for market share. Yahoo, meanwhile, seems intent on giving up the search game entirely for becoming a Web applications provider.

Bing and Google will also likely continue their grudge match over features. In November and December, Microsoft rolled out several new Bing features, including a beta version of Bing Maps that made it a more robust competitor to Google’s Street View. Additionally, Bing now features a more robust video-search page and results from Wolfram Alpha. In 2010, expect both companies to go through several new rounds of competing feature tweaks and add-ons.

Microsoft will also spend 2010 trying to push Bing into foreign markets, notably China; but with Google’s robust presence overseas, and the Yahoo deal restricted to the United States, Bing could have some trouble increasing its market share in those areas.

A Possible Revenue Rebound, Powered by Windows 7

The economic recession battered Microsoft. For the fourth quarter of fiscal 2009, the company reported a 17 percent decline in year-over-year revenue, with earnings arriving at $1 billion below Wall Street estimates. Results for the next quarter offered a somewhat shallower decline of 14 percent year-over-year, with operating income, net income and diluted earnings all continuing to fall by double-digit numbers.

Both Microsoft and its OEMs hope that companies with Windows-based IT infrastructure will use Windows 7 as an excuse to upgrade their systems, and buy the next generation of Microsoft products, in 2010. In both interviews with eWEEK and larger conference calls with investors and media, company executives have suggested that any uptick in sales of Windows 7 and associated products will be roughly in line with any rise in PC purchases through 2010 and beyond, irrevocably linking Microsoft’s fortunes to those of the wider tech industry.

A number of analysts seem to think a tech-refresh scenario is possible.

“It looks like the Win7 inspired upgrade cycle can start in late 2010 and run through early 2013,” Katherine Egbert, an analyst with Jefferies & Co., wrote in an Oct. 12 report. “We expect new hardware purchases to precede the software upgrades by about 6 months.”

But the economy could certainly hit the skids again, in which case a tech refresh would be necessarily blunted as companies battened down their budgetary hatches. In any case, Microsoft executives seem intent on curbing expectations: in an Oct. 23 earnings call, Microsoft Chief Financial Office Chris Liddell suggested that the company would remain “reasonably cautious” about the prospect of a tech refresh, echoing comments earlier in the year from Steve Ballmer.

Microsoft Throws Its Hail Mary Pass for Mobile

By the second quarter of 2009, Microsoft’s share of the mobile operating system market had declined to around 9 percent. October saw the release of Windows Mobile 6.5, but even the company’s executives admitted that the update to Microsoft’s Mobile OS was just a placeholder until 2010, when the company is expected to roll out Mobile 7.

Mobile 7 is supposedly a major upgrade to Microsoft’s operating system franchise, and the company has thus far kept details under wraps. However, continued pressure from a variety of competitors in the space, including Google, Apple and Research In Motion, makes Mobile 7’s quest for market share a decidedly difficult one.

Some have declared that quest an impossible one. “It’s time to declare Microsoft a loser in phones. Just get out of dodge,” Mark Anderson of the Strategic News Service told The New York Times on Dec. 10, in comments widely circulated. “Phones are consumer items, and Microsoft doesn’t have consumer DNA.”

But 2010 will ultimately determine whether Anderson’s comments prove accurate, and Windows Mobile becomes an also-ran, or if Mobile 7 allows Microsoft to retain or gain incremental share in the market space.

Microsoft Plunges into the Cloud, Again Facing Google

Microsoft built its business primarily on the desktop. However, it has taken steps to embrace the paradigm shift inherent in the rise of cloud computing, some of which will bloom to fuller life in 2010.

Jan. 1, 2010 marks the full “switch on” of Microsoft’s Azure cloud platform, composed of three parts that work in symphony to create Web applications and services: Windows Azure, an operating system as a service; SQL Azure, a cloud-based relational database; and .Net services, which provide both secure connectivity and federated access control for applications.

Customers will have three payment options for the service: a pay-as-you-go model, subscription format or volume licensing. Microsoft’s competitors in the space include Amazon and Google.

Given that cloud services represent a potential $150 billion market opportunity, according to research firm Gartner, it’s unsurprising that these companies are all fighting for market-share. For its part, Microsoft could help increase the acceptance of cloud computing within the enterprise.

“There are many enterprises that consider themselves Microsoft shops that have people that only know Microsoft tools and APIs,” Gartner analyst Ray Valdes told eWEEK in 2008, when the Azure platform was first announced. “Amazon and Google have been chipping away at these, but Microsoft is firmly entrenched.”

Microsoft may be positioned well for the enterprise cloud market in 2010, but its other cloud-based endeavors may prove a riskier bet. In a bid to compete with Google Apps, Microsoft will introduce browser-accessible versions of OneNote, Excel, Word and PowerPoint for Windows Live subscribers. Although these Web-based applications will lack the full functionality of the upcoming Office 2010, Microsoft is evidently hoping that enough users will gravitate toward their own cloud productivity suite in place of Google’s offering.

Given that Google Apps have attracted attention among consumers, municipal governments and businesses, however, Microsoft could find itself in a bit of fight when it comes to spreading its own brand of Web-based productivity. But Redmond also doesn’t have much of a choice; in 2010, Google will attempt to spread Google Apps even further among the enterprise and consumers via the propagation of Google Chrome, its upcoming browser-based OS for netbooks and—potentially—more robust PCs. Browser-accessible versions of Office may blunt some of Google’s impact.