Bad News for Microsoft=Great News for Apple

Margie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Coming up with a cutting edge, well marketed product that wows the world appears to have a far greater affect on the long-term bottom line than the immediate rush in sales.  Apple's (NASDAQ: AAPL) iPad changed the world of computing, and appears to have bridged Microsoft's (NASDAQ: MSFT) moat around its operating system.

For years the Macintosh computer entrenched itself as the choice of the trendy elite in Hollywood and the create-o-sphere of New York, as the simplicity of the machinery dazzled the trend setters and slowly pulled market share away from Microsoft.  Now the popularity of the iPad appears to be the catalyst that will speed up the erosion of Microsoft's wall around their cash cow.

According to this article, a survey conducted of 135,000 current Window's users, 42% were planning to buy an Apple product of some kind, Mac or iPad (30% planning to purchase an iPad and the other 12% planning to switch over to a Macintosh).

Now, if 12% of Microsoft Windows users switch over to Macintosh in one year then I would have to deem this a tipping point.  Microsoft still dominates the desktop OS, but imagine losing 12% of your customers in a short period of time.  This only raises the low probability of other longtime users switching, as social awareness of other products grows.

The Explanation

And why is all this happening?

Because Apple captured the world's imagination with their outstanding iPhone and iPad offerings, and as the processing power and capabilities of mobile become more robust, the world shifts away from the personal computer.  Once a certain number of people deem something good, or socially acceptable, it takes much less courage for an individual to make a change (I worked under the presupposition that the majority of people value security and comfort more than anything else). Whereas several years ago you were looked at like a little bit of a freak if you owned an Apple computer, today it has become trendy.

And it appears that if the survey is accurate, tomorrow it will become a whole lot more so.

More Competition: Google

And that's not all. Google (NASDAQ: GOOG)  is coming out with Chromebooks for as little as $199. While I personally need a higher-powered processor for the multiple applications I run, I'm pretty sure that Google will find some customers.

The primary advantages of the Google Chromebook is that anybody can use your computer, or even steal it and not gain/have access to your data as it is being continuously stored in the Google Cloud. Though I suppose for many users it might take time to adjust to this new paradigm, this still is yet another attack on Microsoft's cash cow.

Side Note

If you want to know what is keeping our economy afloat, it is largely technological advances building atop one another.  Eight years ago I paid $200 for an old version of Dragon Speakeasy Software.  Today I can get a computer far superior to the one I used back then for the same price.

Takeaway for Investors

With Windows 8 sales being described internally amongst Microsoft employees as "disappointing," I believe that investors should take a closer look at this stock in terms of the sustainability of corporate profits long term.  Rome was built and Rome fell.  Empires rose and crumbled.  It appears to be the same for Big Softy at this point, at least their once dominant monopoly in operating systems. This is a post-PC world, and Microsoft is not adjusting well.

In the meantime, Apple shareholders will be reaping further spoils for their past innovations.  The only question I have is whether or not they can keep raising the technological bar higher, before the competition catches up.

P.S. Have a thought?  I especially would be interested to hear from Microsoft aficionados if you disagree.  Please be lucid and respectful in your comments.

 


margiecfl is long Google, Microsoft, and Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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