MS is in a difficult situation. In reality, they accomplished their goal long ago (“A computer on every desk and in every home, running Microsoft software”). That has always been the goal of the company and they succeeded years ago. They set a precedent of huge profits for investors and did so in a very visible way. To some extent, the MS share price is representative of the company’s market share. While they’re well off their all time high, they have been largely stagnant for a number of years. It’s pretty hard to grow when you have saturated the market. Still, investors expect at least a competitive ROI. MS has always been about offering products that expand or compliment their core business which is enterprise and consumer software. That’s an area where MS differs from Apple. MS accomplished their goal so they haven’t had to abandon their business model and try something else. That’s not the case with Apple. Apple started as a computer company with hopes of achieving critical mass. Unfortunately, the arrogance and greed that motivated them to believe their products were so superior that customers would line up to buy them proved to be almost fatal. Apple shifted their focus to a completely new market with the iPod where they finally dominated and experienced the benefit of sex appeal. Once successful with the portable music market their situation became similar to MS in that they had achieved market domination. I have no idea when they began to consider the smartphone, but they had to realize at some point that a robust phone with significant data storage could replace the need for a dedicated portable music player. Regardless of reason or timing, Apple now appears to have modified their model yet again into a company that offers more fashion than function. That’s not to say their products are without function, but anyone who is truly objective will acknowledge that we can buy greater functionality elsewhere for a lower price.
So, what about Microsoft? Vista notwithstanding, I don’t think they’re doing a particularly poor job but I wouldn’t be buying their stock. When Vista was released I was critical because I would like to have seen them improve upon XP instead. Unfortunately, that doesn’t make as much money as a new OS. W7 seems to be everything Vista wasn’t, but in the end, MS has still accomplished their goal. Exponential growth can’t last forever.
