Microsoft's 5 Biggest Weaknesses

2. Browsers

Microsoft's 5 Biggest Weaknesses
Once upon a time, Microsoft's Internet Explorer commanded greater than 90 percent market share, dominating the Web browser market as much as Windows dominates PCs today. The Microsoft monopoly earned itself antitrust penalties by beating Netscape into submission, but it wasn't until the rise of Mozilla's Firefox (a descendant of Netscape) and Google's Chrome that the monopoly would be broken.

Nowadays, Microsoft loses browser share almost every single month, dropping to 52.71 percent in total number of users, according to Net Applications, and to 42.45 percent in total page views, according to StatCounter. The discrepancy between numbers of users and amount of usage suggests that the Web's heaviest users are the ones who replace the default Internet Explorer with Firefox and Chrome.

Microsoft's Internet Explorer 9 took steps forward in speed, the user interface, and ability to display sophisticated content like HTML5, and Microsoft is moving to a faster release schedule that brings improvements to users on a more regular basis. Perhaps just as important, Microsoft has made IE9 available only on the newest versions of Windows, arguing that creating browsers that work across all types of computers drives quality down by appealing to the lowest common denominator.

In other words, Microsoft says Google's Chrome and Mozilla's Firefox are hobbled because they run across Windows, Mac, Linux and older, less capable versions of Windows such as XP. Microsoft wants you to believe that unless you buy a new version of Windows, you won't get the best browsing experience.

Microsoft's 5 Biggest Weaknesses
"In the future, the browser is only as good as the operating system and the device it runs on," IE Senior Director Ryan Gavin argued several months ago. "We have to think about these things as being integrated."

Internet Explorer itself isn't a moneymaker for Microsoft, although it can be used to direct consumers to Microsoft's online services. Theoretically, someone who tries out Chrome and likes it better than IE is a potential customer for other Google products, and someone who tries out Safari and likes it may become enamored with Apple.

Because of the move from locally installed applications to the Web, the browser is becoming "the portal into your world," says IDC analyst Al Gillen. "The reason Microsoft wants to fight movement is if you can wrestle the browser away from Microsoft, the more your interface to the rest of the world becomes your browser, and you worry more about what browser you're running than what operating system you're running."

Microsoft's response: Microsoft declined to answer questions about Internet Explorer, but pointed to a blog post by executive Roger Capriotti, who notes that IE9 is gaining popularity among Windows 7 users and business customers.

3. Mobile phones and tablets

Microsoft's 5 Biggest Weaknesses
Microsoft CEO Steve Ballmer famously laughed at Apple's iPhone in 2007, saying, "It's the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard, which means it's not a very good e-mail machine. ... We have great Windows Mobile devices in the market today. I look at that and say I like our strategy, I like it a lot. We're selling millions and millions and millions of phones a year. Apple is selling zero phones a year."

Obviously, Ballmer underestimated the iPhone's appeal, at least publicly. Three years later, when Microsoft unveiled Windows Phone 7, company officials admitted they had to start from scratch. After a botched Windows Phone 7 software update broke devices that were already in the hands of consumers, Microsoft's Windows Phone VP Joe Belfiore said Microsoft was still learning how to push out phone updates, a bizarre situation for a company that had been building phone software for years.

Windows Phone 7 has posted strong customer satisfaction ratings, but it doesn't have all that many customers. It turns out Windows phone Q2 sales dropped from 3 million last year to 1.7 million this year, making the device even less popular than Bada, a smartphone operating system developed on the side by Samsung, which puts most of its mobile efforts into Google's Android.

Things look even worse in the tablet market, which is utterly dominated by Apple's iPad. Windows 7 tablets aren't optimized for touch screens, and Windows 8 won't be out until sometime next year.

Microsoft's 5 Biggest Weaknesses
A partnership with Nokia (which dumped Symbian in favor of Windows Phone 7) and the demise of HP's webOS may help, but predictions from analyst firms IDC and Gartner that Windows Phones will top the iPhone in market share by 2015 were surprising to many. Even after the Bada numbers came out, Gartner stood by its prediction that Windows will become the No. 2 mobile platform behind Android by 2015, although it said the turnaround will not start immediately and will happen mostly outside of the United States. Even this optimistic scenario depends on the vast majority of Nokia Symbian users switching to Nokia Windows phones, instead of the more popular iPhones and Androids.

"The question, again, is Nokia Windows Phone 7's white knight?" Miller says. "I think Nokia makes some brilliant hardware, but I'm not sure it's really enough to pull consumers in."

Developer interest in the platform will, as always, be crucial. One challenge is that instead of scaling its phone OS up to tablets, Microsoft has chosen to adapt its desktop OS to potential iPad competitors. This means applications built for Windows phones will be difficult to port to Windows tablets. Microsoft is set to release more details about Windows 8 in September at its BUILD conference, and this is one question Miller believes the company should address. "My hope is we will see something about app unification at BUILD," he says.

Microsoft's response: Microsoft declined to comment about Windows 8, and did not answer questions about Windows Phone 7 market share or the application development issue. Instead, Microsoft released this statement:

"*IDC has forecasted that Windows Phone will be the number two operating system worldwide by 2015. (IDC, March 2011)

*The Samsung Focus running Windows Phone 7 was voted the favorite AT&T smartphone in PC Mag's Readers Choice Awards. 'The Samsung phones had better reliability and call quality and were also noted as being the best for gaming: Windows Phone 7 devices come with Microsoft's excellent Xbox Live.' (PCMAG.com)

*There are more than 45,000 registered Windows Phone developers.

*Customers have access to nearly 30,000 apps and games on Windows Phone Marketplace, with an average of 100 added each day."

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