Is Microsoft Losing Its Advantage?

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

The news that Microsoft (NASDAQ: MSFT) was slapped with a $730 million fine for failing to honor an antitrust agreement had a slightly negative impact on the company's shares. It was yet one more blow to a company that seems to be losing the stranglehold it once had over the market.

The latest problem stems from an agreement the company had with the European Commission. Under the agreement, Microsoft would give users a choice of browsers when using its operating system for the first time. Instead of being hit with Internet Explorer as the sole browser, Europeans would be offered 11 separate browsers from which to choose. Instead, the European Commission found Microsoft was presenting the same offerings to Europeans as Americans have been experiencing since the debut of Windows 95. The problem, Microsoft said, was due to a "technical error" that began in 2011. The error endured for a full 14 months, ending in July 2012 when it was corrected. Microsoft said the problem was corrected as soon as the company was made aware of it.

Following the announcement, Microsoft's stock fell slightly, but the European Commission ruling is only part of Microsoft's woes. Competition from other browsers, due in large part to the continued growth of mobile device browser use, has caused many analysts to wonder if Microsoft's operating system will continue to dominate the market.

Americans begin to explore other options

The technical community tends to agree. Google's (NASDAQ: GOOG) future has never looked more optimistic, with some labeling it the "darling" of Wall Street. Thanks to the continued growth of Android smartphones and tablets, Google is giving investors good reason to spend more for its stock. But mobile operating systems alone aren't enough to keep Google on top. In fact, Apple's (NASDAQ: AAPL) iPad continues to out-sell Android tablets. Google's continued success has more to do with its diversification than the evolution of technology.

Since first hitting the market at the turn of the millennium, Google has skyrocketed to success, but the company wasn't content to become the world's most-used browser. Instead, Google expanded into every area imaginable, from creating its own browser to allowing website owners to make money off ad placements on their sites and blogs. This continued innovation helps give investors confidence that the company will be thriving long after Microsoft stops forcing its browser on every Windows-based device in America.

Apple and Google - opposite strategies

Apple, on the other hand, has remained focused on doing a few select things as well as possible. While the model makes the company's products successful with its large group of loyal consumers, Google's concept of spreading its offerings out seems to be instilling more confidence in investors. However, it's important to note that while confidence in Google is high, Apple still remains the world's most valuable company, with the highest market valuation of any publicly-traded company.

Microsoft, once king of technology, is now sharing the stage with some fierce competitors. The European Commission ruling only brings to light something many of us have wondered for years - is Microsoft's American success due to free choice, or did many Americans simply use Microsoft's products because of a lack of competition? I, for one, gave up Microsoft Internet Explorer in favor of Mozilla Firefox years ago.

stephfaris has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of 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!

blog comments powered by Disqus