Big Tech: Crucial Times are coming
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) has been the most relevant tech company changing the technological landscape over the last years, so many analysts will be closely monitoring the iPhone 5 and the iPad Mini in the following months for clues about the future of the tech business.
However the big move to watch in the short term is not coming from Apple; Microsoft (NASDAQ: MSFT) will be launching Windows 8, and this will have a dramatic impact on the future of the tech industry.
The Bigger they Are, the Harder they Fall
There is little doubt about the fact that Microsoft has been left behind over the last years. Once the most powerful tech company on the planet, with a tremendously dominant market share and unparalleled access to strategic resources, Microsoft has missed many of the most important opportunities for innovation and growth in the last decade. The company was in a privileged position to adapt to changing conditions, or even create the new paradigms, but its management team didn't have the innovative vision required to do so.
Apple was almost broke in the nineties when Microsoft ruled the tech world. But things have changed in an amazing way since then. Apple has revolutionized many different industries by taking big risks over the last years: the iPod, iPhone and iPad were disruptive products which required the kind of innovative culture that Microsoft didn't have, and now the iPhone alone generates more revenue than Microsoft as a whole.
During the same period, Google (NASDAQ: GOOG) became the undisputed leader in search and online advertising. As if that weren't enough, the company positioned itself extraordinarily well for the mobile revolution with its Android operating platform, which is the most popular mobile platform for smartphones on a global scale by a wide margin.
Amazon (NASDAQ: AMZN) has been the third emerging industry leader in the last decade. In a stark contrast versus the “playing it safe” approach applied by Microsoft, Amazon chose to invest heavily for growth in different business areas, putting competitive strength above short term profitability and becoming the dominant player in online retail. Amazon has also built a powerful cloud computing platform which should mean big opportunities for growth over the following years.
Microsoft’s problems are not only a matter of lost growth opportunities, as computing has been shifting to mobile; the PC market has experienced some serious difficulties. In fact, according to different industry research sources, 2012 may be the first year of declining PC sales since 2001. Not only have PCs been declining due to mobile, Macs have also been gaining market share versus Windows operated PCs over the years.
The Empire Strikes Back
Microsoft seems to have finally realized it needs to counterstrike strongly, and that's why the new Windows 8 will be much different from previous Windows versions. The new OS is an attempt to create a unified user experience for smartphones, tablets and desktop. The company has finally acknowledged the mobile revolution and is making a big move to regain some of the lost ground.
Microsoft still has an enormous user base, and people all over the planet are familiar with the company and its products. Integrating mobile and desktop sounds like a smart idea, so if Windows 8 is successful, the company could get back on track by leveraging its dominant position in PCs and expanding into mobile. This means Microsoft could once again join the group of leaders in the tech industry.
Betting the Farm
But the move is a risky one, if Windows 8 doesn´t resonate well among customers, it could be the beginning of the end for Microsoft. The new OS will be materially different from previous Windows versions, so customers could react in a negative way to the changes. There is no plan B, so the company needs to get it right this time, because a disappointment could be too expensive.
Not only the future of Microsoft is at stake here, Intel (NASDAQ: INTC) which recently reported disappointing earnings figures due to a lackluster PC market, is much dependent on Microsoft and the PC industry. The old WinTel - Windows Intel - duo is reaching a big inflection point.
Bottom Line
Big times are coming for the tech industry, over the following months we will witness one of two possibilities: the resurrection of Microsoft and its chances to become a tech leader again, or the beginning of the debacle of the Microsoft-Intel empire.
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acardenal owns shares of Apple, Google and Amazon. The Motley Fool owns shares of Apple, Amazon.com, Google, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Amazon.com, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
