Microsoft ~ The Fall of a Giant?
I’m sure that, a couple of years ago, Microsoft’s current strategy made sense. They would build Windows 8 as a multi-platform system. Then they’d release it for PC and Windows Phones simultaneously. The cynergy from the PC market would allow Windows to break into a market dominated by the IPhone and Android devices. After that, releasing a living room console based on Windows 8 would simply wrap up the package.
If you follow the tech world at all, you know that it hasn’t really gone that way.
Instead, Windows 8 has been almost universally panned. Sales of PC computers have noticeably dipped since the release of the ill-fated OS, and Windows-based phones and tablets have yet to put a dent in the market dominated by Apple and Google.
The Last Stand
Amidst all this, Microsoft’s one success was the Xbox 360, their living room game console. The 360’s primary competition, the Playstation 3 from Sony, was failing to live up to the promises of this console generation. Microsoft began hanging their hopes for success on the launch of their new console, the Xbox One.
They had a clever business plan for the Xbox One. Again, it looked amazing on paper; they would build the system to cater to every desire a developer could possibly have. The Digital Rights Management (DRM) systems were rock-solid, and the online delivery of games provided a larger profit share for the developer by skipping the game store middleman completely.
The idea here was that the developers would be so seduced by Microsoft’s developer-friendly system that the Xbox One would be the home of all the great exclusive games, which in turn would lure customers to their system.
Worked in theory.
The Giant Falls
The backlash that the Xbox’s strict DRM systems has caused amongst gamers is startling. Sony has seized the moment, releasing a barrage of marketing material at this year’s Electronic Entertainment Expo (E3) that has completely cut Microsoft’s legs out from under them. In the words of notable video game commentator Jerry Holkins, “[t]he damage was so absolute that to speak publicly in defense of the device known as the “Xbone” is to be made a fool. I would avoid the punch at Microsoft’s afterparty.”
Microsoft is now left in the unenviable position of having absolutely nothing successful coming onto the market. On the software front, Apple and Google are taking large swaths of their market share. As to hardware, Sony seems poised to deliver a killing blow to their console system. The company that, not five years ago, seemed to be the eternal giant of the tech industry is about to fall.
Who shall arise to take its place?
Let’s bring this around to personal investment, shall we? We’ll begin with the obvious: if you own Microsoft stock, get rid of it before the Xbox One release in November.
More interesting, though, is the vacuum this creates in the market. Where once there was a massive company, we now have multiple companies competing. That’s going to create some volatility in the tech markets, and putting money behind the right horse is going to lead some savvy investors to a lovely return.
Who do we have lining up?
Well, the favorite is Google. The OS currently running on their Chromebooks needs only slight modification to be viable on a normal PC, and their office software simply needs to have some features added to it to compete with MS Office. Google has doubled down on the concept of cloud computing, though. There’s a convenience to cloud computing, but there’s also a whole passel of privacy concerns. If Google can convince tech consumers that their cloud is secure and private, then they’re going to deal Microsoft a killing blow. That said, Google’s got a long road to make that case, and privacy issues aren’t their strong suit. The limited release of Google Glass, a device that points a camera at everything you look at, hasn’t helped them on that front.
Next up is Apple. Apple has a solid operating system of its own, and has been dominant in the tablet and phone market. Apple’s always been something of an elitist company; they produce their own hardware, and their software only runs on their hardware. This business plan has worked for them in the past, but a larger release of an Apple OS for use on PC’s may just be the thing that finally kills Windows as an OS. Is that a move Apple is willing to make? I’m honestly not sure, but someone at that company has to be considering it.
The Dark Horses
Last up is a number of dark-horse tech companies. Yahoo! is making a long-awaited bid for relevance with its new CEO and acquisition of Tumblr, a popular social site. If Yahoo! is able to strike upwards as Microsoft falls, it may resuscitate itself. Dell, long dormant, also has new leadership and has been looking for a way to break away from the dying PC market. They’ve doubled down on research and development, so they’re worth keeping an eye on. Dell isn’t publicly traded anymore, but any movement from them will certainly have an effect on the public tech stocks, so keep your eye out in the months to come.
Also, don’t forget to invest in Sony. Christmas 2013 is going to be huge for Sony.
If you’re looking to get in on tech stocks, look for the companies that see Microsoft’s weak spots, and target them. Sony did that in a major way at this year’s E3. The question really remains to see who is next.