Linked by Howard Fosdick on Mon 13th Dec 2010 23:11 UTC
PDAs, Cellphones, Wireless It's hard to predict the future because we humans prefer to think in terms of familiar paradigms. Even the most brilliant of our species are subject to this flaw. Now, Microsoft faces its turn. The owner of the operating system that likely runs your personal computer, the company that achieved monopoly with Windows and ducked the Department of Justice's scythe to keep it, faces a midlife crisis as the world goes gaga over portable consumer devices. This is the story of what's happening to Microsoft in the handheld operating system markets -- and how it parallels the earlier, similar journeys of IBM Corporation and Digital Equipment Corporation. Can Microsoft achieve dominance on mobile devices?
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Forget market share think profit share
by Tony Swash on Tue 14th Dec 2010 11:14 UTC
Tony Swash
Member since:
2009-08-22

What's important is to ditch the previous paradigm's way of analysing the success or failure of any technology strategy or product. Even if Microsoft were to take, for example, half the mobile phone market the emergence of the mobile computing market will still be a disaster for them as a company. Why?

During the epoch of Microsoft's desktop monopoly the company could (and for the time being continues to) make very high profits on its core software products such as Windows and Office. These products could be sold with a high mark up because precisely because of Microsoft's monopoly, there were no effective competitors, and the revenue and profits from just these core desktop software monopolies still remain the overwhelming pillars of Microsoft's business.

In the new mobile markets the business model is entirely different. For a start it is highly unlikely that any one company's software will become a monopoly standard for the mobile world so the mark up on software (which is after all Microsoft's core business) will remain far below the rates historically enjoyed by Microsoft in the desktop segment. In fact the situation is worse for Microsoft in the world of mobile software and OS's because it's key competitor (i.e. the other major player with a major offering for OEMs) is offering its products for free.

Secondly it appears that in the new world of mobile devices that the makers of hardware (actually integrated hardware and software i.e. Apple) are the ones making almost all the profits. And Microsoft has no history at all of making even remotely substantial profits from hardware.

So as the technological and economic weight of the desktop fades so will the margins for Microsoft's core business and at the same time even if Microsoft were to achieve substantial market share in mobile OSs and software it will not generate the profits to replace those lost in the desktop market.

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