September 01, 2011, 6:36 AM —
REUTERS/Ray Stubblebine
For all its success as the world's biggest maker of PC operating systems and office programs, Microsoft's position as the dominant provider of software to consumers is at risk.
While Windows still powers the vast majority of desktops and laptops, the emergence of mobile devices and increasing reliance on the Internet have shown consumers and businesses alike that much of what we call personal computing can be done without touching a single Microsoft product.
COMPETITION: Microsoft's top 12 rivals
Microsoft is still a giant, with $70 billion in annual revenue and an amazing 11 products that earn at least $1 billion a year. But it faces challenges in search, Web browsing, mobile devices, Web server software, and even the desktop operating system market.
In this article, we will examine what we think are Microsoft's five biggest weaknesses, a list we came up with in conjunction with the analyst firm Directions on Microsoft. We provided the list and supporting facts to Microsoft's public relations firm on Aug. 15. Microsoft declined to make executives available for interviews, but provided responses to some of our questions via email. We'll include Microsoft responses at the end of each section.
1. Search
Let's start with the easy one. If you use the word "Google" as a verb, you know how far Microsoft's own Bing search engine has to travel before it can be called a success. Microsoft's earnings reports break the business down into five product divisions, and the Online Services Division powered by Bing and MSN is the only one that consistently loses money, including $2.6 billion lost over the past 12 months.
