Microsoft strikes back

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Microsoft is about to enter a new era this week with the release of the latest version of its Windows software. At stake is a lot more than just a new operating system for desktop computers.

Microsoft has dominated the computer industry for three decades, its Windows running the overwhelming majority of computers – first desktops and then laptops. As they say in the Highlander film: There can be only one.

Along with Intel, which made the processors, the Wintel monopoly ruled the PC world.

Microsoft was able to dictate terms to hardware manufacturers and exercised ruthless control over the industry, managing (sometimes just as ruthlessly) the software environment for Windows.

There are numerous tales of woe from competitors who say that Microsoft put them out of business by including software similar to theirs in Windows. The most notable victim was the early web pioneer Netscape, with which Microsoft spent years fighting anti-trust court cases.

The world has fundamentally changed though. There is no longer only one. Mobile devices are the new computers and Windows operating systems are a distant third on both smartphones and tablets, behind Apple’s iOS and Google’s Android.

Intel is under as much pressure because phone manufacturers have chosen mobile-specific processors more suited to battery-driven devices.

The new kings are comparatively little known but are giants in their own right: ARM and Qualcomm.

Smartphones now outsell PCs and it won’t be long before tablets (still dominated by the iPad) overtake the original workhorses of computing and internet access. The future is mobile.

Windows 8 is a major departure for Microsoft. For the first time it has written an operating system that will run on mobile and non-Intel chips, and it will harness the touch interface (some complain that the new navigation system is designed for tablets and fingers but is terrible with a mouse) introduced with its Windows Phone7 software.

What’s more, Microsoft is on the back foot as companies like Google and VMware pose significant challenges to its revenue streams on other fronts.

This year, a decrease in PC sales whacked Microsoft and Intel, underlining the impending sea change in the computer industry. It’s revenue dropped in the most recent quarter, in part, it said, because buyers were waiting for Windows 8.

Google has also been hit by the mobile revenue scare – losing $22-billion in less than half an hour last week when its results were accidentally leaked early – as has Facebook, whose shares are trading at half the list price.

So, this is a big departure for Microsoft. This is not the Microsoft that put out Windows Vista, arguably its most flawed operating system.

This is the post-Bill Gates Microsoft, chastised by repeated market failures with handsets and tablet PCs. Apple has become the cooler kid on the block and Microsoft has lost out on the smartphone surge of recent years (with a mere 2% global market share).

This is the Microsoft that has had five years of the man Fortune magazine called “Microsoft’s new brain”, Ray Ozzie. The visionary Ozzie, and others, such as head of Windows Steven Sinofsky, have turned the lumbering behemoth that was Microsoft around and infused it with cool again.

It embraced the cloud, reinvented its business model to offer monthly instead of outright, one-off payments, and it made apps that people loved (such as Photosynth).

It has been forced into making its own hardware – the Surface table, à la Apple – which has infuriated some hardware manufacturers.

For the first time since Windows 95, gone is the ubiquitous Start button that has been the butt of so many jokes because you had to click on “start” to turn your computer off.

Microsoft has been backed into a corner but it’s coming out fighting. This week is the first full volley of shots. Windows8 is a superb operating system and Windows Phone8 is good too, and a refreshing change from the static icons of iOS and Android. It has utilised its other brands – especially the Xbox 360 games console – to launch gaming and a music-streaming services.

Is Microsoft betting the farm? It seems so.

But, as they like to say in the computer industry, nobody ever got fired for buying Microsoft.

This column first appeared in The Times on 21 October.

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