MUNICH - As a measure of Microsoft's hold over the technology-driven economy, one American tabloid once published a "Countdown to World Domination" calendar in the lead-up to the company's launch of its new operating system. That was nearly 12 years ago.
Today, we are living in a completely different era as the number of PC fans dwindles and nobody is exactly holding their breath for a new version of Windows. Is there anybody left out there who’s still scared of Microsoft?
Personal computer sales have been decreasing for years. And that’s not only a problem for the big PC makers: it’s also a problem for software giants like Microsoft, whose operating system Windows still runs on nine out of ten computers -- and guarantees the company a good third of its profits.
It is this very fact that has rendered the company sluggish. So sluggish in fact that in recent years it has either made half-hearted moves -- or simply slept through -- to react to new developments like Internet search engines, portable music players, digital books, and social networks.
That’s taking its toll now. If people aren’t buying PCs, then they’re not buying the software for them either. Ever more consumers are taking care of what they used to use a PC for on their smartphone or tablet. And they rarely use devices made by Microsoft. The company had to write off $900 million in the last quarter on surplus stock of its Surface tablets. It brought the model out only last October, more than two years after Apple launched its iPad. And then Surface didn’t sell, even at massively discounted prices.
Legacy and innovation
What Microsoft can still count on is their office products, notably Office with its Word, Excel, PowerPoint and other iconic programs that generated one-tenth higher turnover -- $19.9 billion – in the first quarter of this year. Still even those results were below analyst expectations.
Stock market players do not allow public companies time for breathers. Not even Google – the company that has largely inherited the role of world-dominating Bad Guy once held by Microsoft. And the Internet search giant founded more than 20 years after Microsoft manages to hold its position because it was able to migrate its core business of online ads from PCs to mobile devices.
Google developed a Windows counterpart: Android, a trim operating system that can also run on smaller devices. The company makes it available to many hardware manufacturers at no cost. Successfully. In Germany, Android now runs on 60% of all smartphones sold, while Microsoft’s mobile operating system runs on only 5%.
Worldwide, there are now more than 900 million active Android-powered devices, Google boss Larry Page bragged recently. Google is still earning most of its money from its search engine ads. Banners on Internet pages like the YouTube video platform that belongs to Google are ever-greater earners. The number of clicks on ads has risen significantly, although revenues per click decreased. One of the reasons for that is that many of these ads are being sold, at lower prices, for smaller smartphone displays.
What’s Google doing now? Spending money on development. Stock market speculators don’t like that either -- there were fewer profits from the markedly higher proceeds of $14.1 billion in the last quarter. So they sold Google shares. But that by no means should have anyone tossing away their Google calendars counting down to their World Domination.