Microsoft: an injured beast - TechCentral

Microsoft: an injured beast

[By Duncan McLeod]

A year ago, Apple’s market capitalisation blew past Microsoft’s. Now Apple has surpassed its decades-long rival in net profit for the first time in 20 years. The maker of the iPad and iPhone is in the ascendancy. But it’s too early to write off the “Beast of Redmond”.

The rise in Apple’s share price in recent years has been nothing short of extraordinary. On the back of a series of consumer product sensations — most notably the iPod, the iPhone and the iPad — the Apple share price has risen by an eye-watering 2 500% in the past decade. In the same period, Microsoft’s stock has fallen 25%.

Apple is now the world’s most valuable technology company by some margin. Having overtaken Microsoft in terms of market value a year ago, Apple is now worth US$100bn more than the maker of Windows and Office. It’s the second-most valuable company in the world after Exxon Mobil.

Insatiable consumer demand has translated into soaring profits. In its latest quarterly filing, Apple reported a net profit of $6bn, against Microsoft’s $5,2bn. What’s remarkable for a company of Apple’s size is that it almost doubled its net income from a year ago. It’s a giant profit growth machine and, with new Mac computers, music players and phones coming this year, it seems unstoppable.

In the face of Apple’s rise, it’s tempting to write off Microsoft, which is based in Redmond, Seattle. It has behaved a bit like an animal caught in the headlights in the consumer technology market in recent years.

However, anyone writing off the company does so at their peril. Microsoft has all the problems that come with being a giant, unwieldy corporation, but every indication is that the company — sometimes referred to as the “Beast of Redmond” — is on the verge of staging a remarkable comeback.

In smartphones, conventional wisdom is that it’s now a race between Apple (with its iOS platform) and Google (with Android). But Microsoft’s deal with Nokia has put its (now very good) Windows Phone software right back in contention. Some analysts think Microsoft could take up to a quarter of the worldwide smartphone market by 2015.

And in PC operating systems, Microsoft is still the only real game in town. It might not have the sex appeal of Apple’s Mac OS X, but by some estimates Windows controls up to 90% of the desktop computer operating system market, translating into billions of dollars in annual profit. Windows 7 and Office 2010, used by hundreds of millions of cubicle dwellers worldwide, are both fine products.

It’s true that Microsoft is lagging badly in the tablet space. But here, too, it could soon be on the comeback trail. Windows 8 is being designed from the ground up to be tablet friendly — it will run on the low-powered microprocessors popularly used in these devices.

If tablets catch on in the corporate world, chief information officers will be keen to adopt a platform that plays nicely with their back-end systems. Business IT is one of Microsoft’s key strengths, and an area of profound weakness for Apple.

On most fronts, Microsoft is building great software: Windows, Office and now cloud-based (hosted online) apps. Even its once-detested Internet Explorer Web browser has been greatly improved in its latest releases. More importantly, Microsoft has a powerful developer community, able to build the applications that will run the next generation of Windows-based devices.

It’s true that Microsoft is facing more competition than ever and that a once-formidable marketing machine has become terrible at selling itself. But it’s picking itself up off the floor. And an injured beast can be dangerous.

2 Comments

  1. Where are Apple products manufactured ?
    One assumes / hopes that this part of the World remains stable ?
    There is very little manufacturing capability left in the US !

© 2009 – 2020 NewsCentral Media