Microsoft: The old empire strikes back

2012-10-27 08:30

Washington - It used to be that Microsoft was the evil empire, and Apple the scrappy underdog.

Now the roles are reversed, and Microsoft is challenging a dominant Apple, which has staked its claim as the leader of the sizzling mobile sector for tablets and smartphones, as well as the biggest seller of digital music.

Microsoft, still the biggest force in the PC market with its Windows operating system, is making a new, belated effort on Apple's turf.

The Redmond, Washington-based giant has launched its own branded Surface tablet with prices and specifications similar to those of the iPad, and a new Windows 8 operating system designed for tablets.

Microsoft also is making an aggressive push in mobile phones with its Windows Phone 8 platform being used by Nokia, Samsung, HTC and others.
And it has created its own music service as an alternative to Apple's iTunes, with 30 million songs and additional features offered by Internet radio operators.

"Microsoft is the challenger now, and it is taking a lot of pages from Apple's playbook," said Roger Kay, an analyst and consultant with Endpoint Technologies Associates.

Kay said Microsoft is learning from Apple about the advantages of "having control of the integrated stack," meaning software and hardware, along with other services to keep users within the company's ecosystem.

But he said Microsoft has "constraints" because its updates must remain compatible with older devices, making the task more complex.

"Microsoft can write software which is as good as Apple's but it has to be free of the constraints," Kay said.

"Apple can and has said to customers, 'Throw out all your old devices, because we have new ones.' Microsoft has been at a disadvantage."
He said Microsoft has the potential for a fresh start with the new tablet, which integrates hardware and software called Windows RT in a new product.

But the tech landscape is far different than in previous Microsoft-Apple clashes. Amazon claims some 22% of the tablet market, and Google and its partners using the Android system are a major force in mobile.

But Microsoft appears to be digging in for the long-haul by getting into tablets, the mobile market and music.

Kash Rangan, analyst at Bank of America/Merrill Lynch, said Microsoft appropriately priced the new tablet starting at $499, the same as the entry-level iPad. This will avoid "cannibalisation" of products which impact the Windows franchise.

And because Microsoft will include its Office software in the tablets, they "appear less pricey to users relative to iPads," said the analyst, who expects about 5.2 million of the Microsoft devices to be sold over the coming year.

'Ecosystem' like Apple

In music, Microsoft is making a new offensive with its Xbox music service more than a year after it pulled the plug on its Zune digital media player, a would-be rival to Apple's iPod.

However some analysts said the new service might fare better.

"The service takes aim at a fractured digital music landscape (where) consumers have to use multiple services such as iTunes, Pandora and Spotify today and do not have one simple destination that allows them to do everything," said Richard Greenfield at BTIG Research.

With the various initiatives, Microsoft is seeking to build an "ecosystem" like Apple, which can deliver the devices and services to remain connected to consumers.

"People are looking to buy a complete package, that's what they buy when they go to Apple," said Jack Gold, analyst with J Gold Associates.

Frank Gillett at Forrester Research said that while Microsoft is used on some 95% of PCs, its share of all "personal devices" - which include PCs, smartphones, and tablets - is only around 30%.

The new initiatives "will simply stop the shrinking, maintaining Microsoft's share at about 30%," he said.

"By 2016, we believe that Microsoft will have about 27% of tablet unit sales, but only about 14% of smartphone sales - and some of us are very sceptical they'll even get to 14%."

Gold said while Microsoft may not be able to dominate in tablets or phones, its strategy appears to "kickstart" the market to keep the Windows platform relevant.

"You never want to sell Microsoft short," Gold said.

"They have a lot of resources and they're not a company that gives up. They are applying significant amounts of resources to transition the company to address the new market realities. And they've reinvented themselves several times already."

  • greg.quinn.353 - 2012-10-27 08:59

    Let the games begin...

      charlesbronson.bronson - 2012-10-27 21:05

      Viva Microsoft Viva. Down Apple down!

      werner.nel.984786 - 2012-10-28 06:48

      Apple successfully sued Samsung for copying them, in America, but only in America. Apple lost the case in 11 other countries. It was a case of an American Judge protecting an American company. Now who's going to win in America when these two start sueing each other...

  • adrian.hill.750 - 2012-10-27 09:25

    The perfect CRAP computer: Ipad 7" running Windoze 8

      paul.bester1 - 2012-10-28 12:28

      @Doorboot Why does it have to be a playbook? I agree with him and I bought the Galaxy Tab. Let me guess: you bought an iPad? I still love my PC but there isn't a chance in hell that I'm upgrading (downgrading?) to Windows 8. I wouldn't even download a pirate version of that OS.

  • gerry.sandton - 2012-10-27 09:26

    Microsoft's "constraints" is the same reason why IBM is not a major force in non-mainframe software, viz. back-level compatibility issues

  • horace.spector - 2012-10-27 09:31

    Go Android!? MS have to cater for a host of devices - PC's, tablets, smartphones - all with variants of the same OS. I wouldn't bet on their long-term future

      lydonmcg - 2012-10-27 13:45

      Why is that a bad thing? Being able to use a variant of the same OS on your PC, tablet, phone and to an extent your gaming console (in terms of interface) is a major bonus and one of the reasons I would bet on Microsoft's future.

      horace.spector - 2012-10-27 13:56

      @lydonmcg.....comes down to basic cost/speed of development and subsequent maintenance of the current and future versions that all have to exploit their respective platforms. You don't have to be a rocket scientist to guess their long-term future!? Bottom line, they are on the defnesive and have to spend more (than their competitors) in order to comptete.

  • ForeverWP - 2012-10-27 09:48

    In time Apple will be just that, a piece of old fruit and something new will come from MS.....the leader always becomes complacent and so Apple will fail in time......its fate, nothing can be done about it not even the most ardent of Apple pie eaters!

  • robert.jodas - 2012-10-27 17:04

    Bottom line people are used to microsoft and dont want to change to , Mac, Linux and so on. it is the basic cusumer who whole control the market, I ove unix but majority rules, we can stop it

      raath - 2012-10-29 06:47

      Wait until you see the Windows 8 interface - we have users who don't even like the Windows 7 interface (compared to XP), let alone the new Win 8 interface.

  • indianajohn - 2012-10-27 18:04

    "Now the roles are reversed, and Microsoft is challenging a dominant Apple" Excuse me? Where? Apple has grown tremendously in the last decade and as far as DEVICES go, they are in the lead, but since when is Microsoft a hardware company anyway? Everyone you look there are Windows machines, with the odd lonely Mac here and there. What a weird statement to make.

      raath - 2012-10-29 06:49

      Did you know that the revenue Apple gets from the iPhone ALONE is more than that of the ENTIRE Microsoft? Yes, Apple isn't dominant in the PC market (heck, an iMac isn't a PC, it's a MAC), but on other platforms they are certainly much more dominant than Microsoft)

  • rurapenthe - 2012-10-27 19:03

    They will try, but Apple will win :-)

  • Paul Christian Gibbon - 2012-10-28 08:15

    We love apple cos of the quality. Since my first apple I've changed everything to apple. No more Microsoft computer crashes. Nice one apple Is windows RT short for Microsoft ReTarded Loving the stability and quality

      indianajohn - 2012-10-28 13:30

      Apples are for people who don't like computers :) I couldn't stand them. I don't really get this stability thing either, my Windows machine hasn't crashed in years, and for someone who loves computers there's only one choice. You just can't get your hands dirty with a Mac. Which is great, if you're not into that kind of thing and just want pretty pictures and a "safe" user experience. I think of Macs as Porsches with their enclosed engines that you can't get to. Some don't care, for me it takes away a major part of car ownership. Only difference is that Porsches are probably worth the money. No Mac I've ever seen can be called value for money.

      Paul Christian Gibbon - 2012-10-28 20:16

      Don't want to open a computer. Want it to work for me.

      raath - 2012-10-29 06:53

      I replaced my Windblows PC with an iMac, and I love the stability and speed - the OS is made for the hardware - not like with Windows where they have to cater for every possible hardware iteration out there - it convolutes the driver stack - Apple can keep it simple and clean, and therefore fast and stable.

  • erena.slabbert - 2012-10-28 13:39

    Oh Microsoft the train left the station a long time ago....... youre late

      deon.meiring - 2012-10-28 16:23

      Erna...very true!

  • Prayer Phokompe - 2012-10-28 23:47

    I want to get a Macbook but don't know what to expect and from the article, i think i'm in for a great journey...

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