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.

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6 Responses to Microsoft ~ The Fall of a Giant?

  1. Lots of interesting info here! Those giants always seem to fall sooner or later, don’t they?
    Laurie @thefrugalfarmer recently posted..Rosemary Thyme Lemon ChickenMy Profile

  2. I am a current Xbox fan, but the latest release might push me over to Sony. Microsoft has made a huge mistake.
    Grayson @ Debt Roundup recently posted..Loan Options for RetireesMy Profile

  3. From a trader’s perspective, Microsoft is one of the most static, range-bound stocks in existence. The thing just hovers and puts in minor gains and minor losses.

    We all know Apple is monster but the real threat to both of these companies and mores so Microsoft at the moment is Google.

    While many argue that the PC is dying and on it’s way out as tablets and even smarter phones continue to replace them, Microsoft may one day be relying solely on its patents and Xbox sales to keep them afloat. Grayson makes a good point too, their latest gaming release in terms of the X-box one is being received as a disaster.

    Great article though!

  4. Microsoft had a great run, now it’s time for others to experience it. I’m really expecting to Google and Apple to take over soon. That’s just my two cents anyways.
    Mark Ross @ Think Rich. Be Free. recently posted..Different Ways To Achieve Business SuccessMy Profile

  5. Peter Jones says:

    Sean –

    You are totally right about Microsoft’s history; that’s backed up by their stock charts. But never in Microsoft’s history have they tanked on every single business front before. They are rapidly losing market share.

    It hasn’t shown up in the stock price yet, because most traders think exactly the way you do. But if you look at performance in their market, their competitors are spanking them from every angle. That means the people speculating on Microsoft stock right now are dramatically overvaluing the company. We’ll check back in one year from now to see if I’m right.

  6. I ctrl+F’d this post and all comments for “Linux” and drew a blank. Don’t think Linux is a contender for desktop OS’s? Think again.

    Seriously. Just search Google/Bing Images for:
    “linux mint 15 olivia”

    It has a jaw-droppingly gorgeous minimalist design. It looks better than both Windows and OSX. Let’s not forget that Android is a version of Linux and is doing really well thanks to Samsung/Google.

    Also Unix (not Linux) will always be used within academic circles because it encourages people to learn. Crazy right?

    Regarding Windows: Microsoft historically releases alternating ‘great’ and ‘terrible’ operating systems. 98 was fine, 2000/ME was terrible. XP was fine, Vista was awful. 7 is great but 8 isn’t so hot. I’m also pretty sure that Windows 8 – Mobile isn’t actually a version of “Windows 8″ (unless you’re considering tablets/swivel-tops). Only in name.

    The XBOX One has been a greed-centric and veritable marketing disaster. Gamers often subscribe to the counter-culture and will use any excuse to turn on a big, juicy multi-national company. Whoever didn’t see this coming should be fired with immediate effect :)

    I can see Microsoft falling out of the console race just as SEGA and many before have done (though they still produce games/titles). I can’t see myself ever NOT chilling in-front of my Desktop machine. It’s too comfortable in comparison to tablets/laptops (which must always rest on the knees or be held-up).

    I like the post. Maybe include something on the recent advances of Linux as a free consumer-esque product. Now that the Chromebook is pushing most software developers to create browser-based app-variants (OS-universal!); there’s not a lot of reason to purchase an OS when you can just download Linux.

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