ON MICROSOFT'S MOMENT OF VINDICATION

WHAT NEXT?

It was never a question of IF, just WHEN. 

Given Microsoft's dominant (aka monopoly) installed base of Windows and Office, it was inevitable that the company reap the benefits of the PC upgrade cycle kicking in, both here and overseas.

Well, it's now apparent that the moment was now, specifically, the gang-buster September quarter that Microsoft reported yesterday.  You can read all the details on the Techmeme discussion. 

A perfect storm of Windows Vista sales in the OEM channel, PC sales overseas, particularly the BRIC countries (Brazil, Russia, India, China), and the release of Halo 3 driving XBox 360 sales.  They all contributed to the stock-popping quarter.

All good stuff, and an opportunity for Microsoft to impress Wall Street once again.  It's been a long time coming.

This is the first of several Vista waves, the others coming as Microsoft updates Vista with SP1 and SP2 packages in the coming months.  Those will likely have more voluntary purchasers, both on the consumer and business fronts. 

The question of course is what happens after Vista and Halo have run their course?

What's next from Microsoft amidst all the changes that are radically changing the computer marketplace?

Will the next perfect storm also be a benevolent one like this one, or will it be a perfect storm that goes the other way?

What's particularly unusual is that we have less visibility on what's next than ever before in Microsoft's amazing history.

Because next time around it's more of a question of IF rather than WHEN.

Comments

[Alex Tolley]

I'm not as sanguine about this as Techmeme. Firstly, Vista sells because it is pre-loaded on the machines. What choice do consumers have? The only viable alternative is Apple - which, despite its higher prices - showed extraordinary market share gains as some people switch away from Windows. Whatever one's feelings about Windows and Vista, the OS business cannot really grow significantly faster than the industry, and with the long release cycle, Windows will pretty much grow with the PC business.

MS Office is bought principally by corporations, a herd mentality creating inertia. Again, this business is restrained to the growth in the PC business.

This means that MS' growth must come from new businesses. So far they haven't shown any great acumen to lead in these new areas.

It is certainly arguable that MS still uses its corporate size and dominance in the OS market to ensure its relevance and growth, but I think that is a dubious long term proposition. In recent years, the "embrace and extend" philosophy has encountered considerable push back, and certainly the fear the company used to engender is dissipating.

What is clear to me is that the computing model is moving to ubiquitous, mobile platforms with access to content a key part of the application space. That does not play to MS strength, but rather undermines the need for monolithic OS, weakly coupled to the compute cloud. To me, MS looks like IBM, a corporate giant slowly becoming irrelevant but with a lot of resources and power still at its command.

[Alex Tolley]

I'm not as sanguine about this as Techmeme. Firstly, Vista sells because it is pre-loaded on the machines. What choice do consumers have? The only viable alternative is Apple - which, despite its higher prices - showed extraordinary market share gains as some people switch away from Windows. Whatever one's feelings about Windows and Vista, the OS business cannot really grow significantly faster than the industry, and with the long release cycle, Windows will pretty much grow with the PC business.

MS Office is bought principally by corporations, a herd mentality creating inertia. Again, this business is restrained to the growth in the PC business.

This means that MS' growth must come from new businesses. So far they haven't shown any great acumen to lead in these new areas.

It is certainly arguable that MS still uses its corporate size and dominance in the OS market to ensure its relevance and growth, but I think that is a dubious long term proposition. In recent years, the "embrace and extend" philosophy has encountered considerable push back, and certainly the fear the company used to engender is dissipating.

What is clear to me is that the computing model is moving to ubiquitous, mobile platforms with access to content a key part of the application space. That does not play to MS strength, but rather undermines the need for monolithic OS, weakly coupled to the compute cloud. To me, MS looks like IBM, a corporate giant slowly becoming irrelevant but with a lot of resources and power still at its command.

[Dennis Chan]

Microsoft will continue to do well because they own the PC space. But the next significant move for them will be in social Web. Witness their investment in FaceBook which could be a new operating system environment.