The Sun is Setting on Microsoft

It took the dinosaurs a long time to perish. Microsoft has a huge installed base and a ton of cash, so its demise is far from imminent. But Microsoft is becoming much less relevant.

It’s an open secret that Vista is somewhere between a dud and a disaster. I have had friends who are not at all venturesome tech wise tell me they will use their current PCs as long as they can and then buy a Mac rather than upgrade to Vista. And Brussels is now threatening to impose yet more fines on Microsoft for failing to consent to earlier orders about making its application interface code more accessible to competitors so they can design Windows-based products more quickly and successfully.

The irony is that the Office suite may eventually turn out to be the core product cash cow for Microsoft, and will help preserve the OS market share, even though Office runs perfectly well on a Mac. There is still a perception that Word and Excel have fewer problems on a PC, and it’s hard to dispel that belief (and it is true there are far more Excel ad-ons for the PC version).

Here are a few high points from a ComputerWorld review of Vista a month ago, “Windows Vista: The ‘Huh?’ starts now:”

Microsoft is losing consumer operating system market share to Apple for many reasons, but most of those reasons can be oversimplified thus: Mac OS is simple, and Windows is complicated.

That’s why it may be such a costly error for Microsoft to make the Vista upgrade such a confusing mess.

Until today, even experts couldn’t tell you off the top of their heads the differences between each of the many Vista versions — or even how many versions there are — or what the basic requirements are for the Upgrade versions. Ordinary consumers are baffled to the point of paralysis….

When Bill Gates launched Windows 95 a dozen years ago, consumers understood what they were getting. It was a brand-new Windows, vastly superior to Windows 3.x, and came in exactly one version. PC users could just go to the store and buy it, take it home and install it, and they didn’t need a doctorate to figure out how to do all this.

Fast forward to this week. Windows Vista launched with 10 — count ’em, 10 — versions. Instead of giving us a simple new upgrade path to the future, they instead gave us a homework assignment….

I’ve said it before, and I’ll say it again: Don’t buy Vista yet. But if you really must, consider only two of the 10 versions: Nontechnical consumers should buy the full version of Windows Vista Home Premium, and power users should buy the full version of Windows Vista Ultimate.

Consumers have taken note. Barry Ritholtz has been pointing out Vista’s shortcomings, and today directed us to a post on Barron’s TechTrader blog, “Windows Vista: Not Exactly Selling Like Hotcakes At”

In the latest of the High-Tech Strategist newsletter, editor Fred Hickey (Sorry, he does not maintain a Web site, so no links for you) notes that consumer demand to upgrade to Microsoft (MSFT) Windows Vista is less than enthusiastic. Hickey asserted that Vista had dropped off the list of the top 25 best selling software programs, with the highest ranking for any version at 26th place. That seemed surprising, so I just checked. And as of this afternoon, the highest ranking for any version of Vista on the Amazon list of best-selling software is now 32nd, for the Windows Vista Home Premium Upgrade.

That means Vista is being outsold on right now by such blockbuster software products as Roxio Toast 8 Titanium (CD and DVD burning software), Quicken Willmaker Plus 2007, Dragon Naturally Speaking 9, six different versions of TurboTax and – ye gads – Rosetta Stone Spanish, language instruction software….

The real point here is that the slow uptake for Vista has ripples for the entire PC supply chain. “Tech bulls expected Microsoft’s new operating system, Vista, to be a big demand driver in 2007,” Hickey writes in his newsletter. “The PC industry built up inventory in anticipation of a major upgrade cycle. However, we now know that Vista’s initial reception, from both business and consumer customers, was far chiller than almost anyone imagined…Instead of a Vista pickup, it looks we’ve entered a Vista stall.”

The Financial Times recounts the latest regulatory skirmish in today’s “Brussels threatens more Microsoft fines:”

Microsoft was on Thursday dealt a serious setback in its long-running antitrust battle with the European Commission when Brussels threatened to impose yet another massive fine on the US software group for failing to comply with a landmark competition ruling handed down almost three years ago….

Since the Commission opened its probe against the world’s largest software maker more than eight years ago, Microsoft has been fined close to €780m ($1bn) for abusing its dominant market position and failing to respect the regulator’s ruling.

The Commission refused to comment on the size of any new fine that could arise from Thursday’s charges. However, Brussels could – in the worst-case scenario for Microsoft – hit the group with a penalty in excess of €800m.

The Commission accused Microsoft of demanding excessive royalties from companies wishing to license technical information about its Windows operating system. The order to make such information available to rivals formed a key plank of the Commission’s March 2004 ruling against the group.

The Commission stressed that Microsoft was the first group to be accused of ignoring a European Union antitrust ruling. “This is a company which apparently does not like to have to conform with antitrust decisions,” said the spokesman for Neelie Kroes, the EU competition commissioner.

Brad Smith, Microsoft’s general counsel, rejected the Commission’s allegations, pointing out that the group had “spent three years and many millions of dollars to comply with the European Commission’s decision”. He said Microsoft’s proposed pricing scheme would in fact be 30 per cent cheaper than comparable licensing fees.

Under the terms of the 2004 ruling, Microsoft has to make available “interoperability” information to other software makers so that rivals can design server software that functions smoothly with Windows-driven computers and servers.

The Commission said on Thursday it had found “no significant innovation in the interoperability information”.

It also claimed that companies were being asked to give Microsoft 35 per cent of the net operating profits they made by selling products designed with the help of the licence.

The original 2004 ruling is under appeal in front of an EU court, which is expected to issue its ruling in the next six months. Should it decide to overturn the Commission decision, the regulator would have to pay back all the fines imposed so far.

Reading between the lines, it appears Microsoft is stonewalling in the hopes that the initial ruling will be overturned. The Commission is clearly having none of that, and the new set of fines is punishment for the company’s intransigence.

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One comment

  1. ham56let

    I think, Microsoft should be able to protect their code and the E.U. is just getting out of hand. With ttheir fines and pressure they are out of control. If a company creates something they have the right to preserve the quality of it.

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