Beleaguered Microsoft in decline; Windows-maker the digital equivalent of General Motors

“There were two interesting Windows-related news stories last week. First, Joe Wilcox’s story on a report from NPD claiming that 91 percent of $1,000-and-higher retail computer sales now go to Apple. Second, Microsoft’s quarterly financial results, in which revenue fell $1 billion short of projections and declined 17 percent year-over-year,” John Gruber writes for Daring Fireball.

“What is particularly alarming about Microsoft’s numbers is that revenue from its Windows PC division suffered an even greater year-over-year revenue decline than the company as a whole: 29 percent. One explanation for that is that Windows 7, a major new update, goes on sale in October, and so it’s expected, somehow, that Windows revenue would decline in the months preceding its release,” Gruber writes.

“But Microsoft’s operating system business is not new, and it has never been particularly cyclical. Windows revenue, prior to this just-completed quarter, has only ever gone in one direction: up,” Gruber writes. “Windows is at the core of everything Microsoft does that makes money. They sell Windows, then they sell software that runs on Windows. As Windows goes, so goes Microsoft, and right now Windows is heading south.”

Gruber writes, “One argument is that the fault lies with the global economy, not Microsoft itself… [but] Apple operates in the same economy Microsoft does, and Mac sales are up. And the numbers from the aforementioned report by NPD are simply astounding.”

“Apple’s strong growth in this segment is a sign that the market is turning against Windows. If for no other reason than that Apple has never entered the low-cost computer market, it’s always been the case that the most budget-conscious computer buyers were Windows users. But the converse wasn’t true — not all Windows users were cheapies,” Gruber writes. “Today, though, Microsoft is increasingly left only with customers whose priority is price.”

“Microsoft’s core problem is that they have lost the hearts of computer enthusiasts. Regular people don’t think about their choice of computer platform in detail and with passion like nerds do because, duh, they are not nerds. But nerds are leading indicators,” Gruber writes. “This is true in many markets with broad appeal, not just computers. Microsoft is looking ever more so like the digital equivalent of General Motors. Car enthusiasts lost interest in GM’s cars long before regular people did; the same is happening with Windows.”

Gruber writes, “And in mobile software, the fastest-growing segment of the computer industry, Microsoft’s platform is both inferior and unpopular. Their plan to address this is to change its name.”

There’s much more in the full article – recommended – here.

MacDailyNews Take: We searched our database to find our first reference to “General Motors” in a MacDailyNews Take. Here it is, from January 10, 2005:

As we have always said, even as many short-sightedly waved (and continue to wave) the white flag, the war is not over. And, yes, we shall prevail. For the naysayers: In 1929, Ford held just over 61% of the U.S. market for automobiles. GM’s market share stood at just 12%. Ford was thought to be invincible, with GM regarded as a niche auto maker. Probably, some analyst at the time said, “The reality is, long term, GM will always be a niche player.” But, in 1936, just seven years later, Ford held just 22% of the market for new automobiles while General Motors held a 43% share. No company is invincible. Not even Microsoft.

At the time, some laughed. Who’s laughing now?

49 Comments

  1. Great article. Microsoft should be very worried. If the “cheaper is better” argument isn’t working at a time when the economy is so bad, how is going to work any better when the economy starts to pick up again?

  2. “Beleaguered Microsoft in decline; Windows-maker the digital equivalent of General Motors”

    That is total BS.

    GM makes at least one model worth owning.

    …don’t they?

  3. And in mobile software, the fastest-growing segment of the computer industry, Microsoft’s platform is both inferior and unpopular. Their plan to address this is to change its name.

    THIS IS PRICELESS!!

  4. “Who’s laughing now?”

    Well Steve Ballmer seems to laugh a lot these days. But I don’t think it’s a healthy laugh. It’s more like a padded room laugh.

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