Best Days for Microsoft May Still Be Ahead

Microsoft has been making plenty of news recently, namely with the introduction of X-Box and Windows XP, the appointment of Rick Belluzzo as president and chief operating officer and the downgrading of the stock by no less than noted high-tech stock analyst Henry Blodget. As Microsoft celebrates its 25th anniversary, are Redmond's glory days behind it? Or are the best yet to come?

Let's look at some of the issues. Blodget downgraded Microsoft on the basis that no company has succeeded when moving from an old paradigm to a new one -- in Microsoft's case, from the desktop PC to the Internet.

But the facts don't support that. Since Microsoft began its assault in earnest on the Internet, it has managed to displace Netscape with Internet Explorer as the overwhelming browser of choice, created a strong online brand via Microsoft Network and built a platform for e-commerce and Web solutions that's successful by any standard. Oh, it also does that old desktop PC thing pretty well.

That's the key to Microsoft's success. Rather than resist trends, it has always focused on the idea of "embrace and extend," which allows it to attack multiple markets simultaneously. That's what's behind Belluzzo's promotion from his 18-month-long stint as vice president of the company's consumer division. Microsoft needs someone who understands its traditional business customers and its renewed shift to consumers.

An overall logical assessment of Microsoft would indicate that its future looks bright. While PC sales have slowed overall, Microsoft has been working carefully to enter new markets, such as handhelds with the Pocket PC and the home market with the X-Box. Today, Compaq's iPaq, which is based on the Pocket PC platform, remains in high demand and short supply and challenges Palm's offerings at the high end of the line. Based on early previews by those who cover the video game space, the X-Box's planned introduction in the fall will be a major success. Initial projections say that if Microsoft can meet demand properly, it will make a grand entrance and give Sony and Nintendo a run for their money.

At the other end of the spectrum, Microsoft is preparing the Whistler release of Windows, now known as Windows XP. This will finally unify the core base of the Windows operating systems under the Windows NT kernel. More important, it will provide the base of Microsoft's "digital hub" for business and consumers in an era of multiple devices and ubiquitous computers. Unlike Windows 98 or Windows 2000, with its business focus and limited marketing push, XP will offer major advantages to consumers and business users in much the same way Windows 95 did. Microsoft's likely promotion of XP will probably exceed the initial hype of Windows 95, and a steady hype for XP will help make it very profitable.

More than ever, Microsoft needs to wage war on several fronts. It must convince users that the rich experience of the PC is valuable over dedicated information appliances. It must also focus on digital appliances such as the X-Box and Pocket PC that complement traditional PCs and make a strong case for a migratioon to its Internet-based .Net services. The combination of Belluzzo's experience in the consumer division, coupled with the enterprise expertise of Steve Ballmer and Bill Gates, will serve Microsoft well in its strategic battles over the next several years.

I've often said that Microsoft's name alone evokes an emotional response. The conventional wisdom is "Love them, hate them, admire them or stand in awe of them -- in today's world of technology, you can do anything but ignore them." More than ever, that statement is true. Microsoft's approach in attacking the traditional PC markets and combining them with Net-based and information appliance-based offerings will likely yield a formula for success and a bright future.

This story, "Best Days for Microsoft May Still Be Ahead" was originally published by Computerworld.

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