Opinion

Is there more to Microsoft than Windows?

Only the churlish would seek to dismiss a company reporting record revenue and profits, especially when that company is Microsoft, the biggest software business in the world. As I'm not churlish by disposition, I won't, although quite a few others have. 

Some people have noted that sales of Windows, the bedrock of the company's existence to date, declined slightly for the year to 30 June 2011. At the same time, sales of Office 2010 helped fuel a big increase in revenue at the Business division. The Server and Tools business also grew. Perhaps the biggest success was in Entertainment & Devices, which covers the Xbox and Kinect, where sales were up 45%.

So although Windows fell a little bit, other parts of Microsoft's business more than made up for it. Looking forward, there is a suggestion that Microsoft's failure so far to break into the fast-growing tablet market (and the equally lucrative smartphone sector for that matter), could have potentially painful effects on its Windows business if it ends up confined to the PC ghetto. We shall see.

But what the success of some of the other business units demonstrates is that if Microsoft does get the strategy right with tablets and smartphones, the opportunities will also exist for other parts of its business to exploit those markets as well.

The big question is whether Microsoft has the knowhow and cultural awareness to be successful in areas beyond the comfort of its PC domain. To some extent, Apple has shown how it can be done and Microsoft would do well to follow its rival's example where appropriate.

The continuing difficulties at Microsoft's online services division, which houses the Bing search engine, show that merely throwing money at the problem to gain market share in the long term can be a very expensive process. True, Bing has increased its US search share to 14.4%, but over the past three years, the division has reported losses of more than $6.5bn. Somehow, I don't think Microsoft wants to find itself in similar territory for tablets and smartphones. Neither will the shareholders.

This was first published in July 2011

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