The 8 Things That Scare Microsoft

Microsoft is in the midst of a major overhaul.
It's building its own tablets, risking its relationships with device makers. Its plan to hurt Google with Bing hasn't worked. It's still struggling to get people to love its phones.
Its most recent quarterly report plainly spelled out its biggest threats.
Microsoft has a lot of opportunities, and it's talked plenty about those. But here's what the software giant should worry about—straight from its own mouth.

1. It's not just about software. It's about the cloud!

Microsoft really wants you to know that it's a player as software goes online—"in the cloud," in industryspeak.
It names six cloud platforms: Office 365, Xbox LIVE, Dynamics CRM Online (a Salesforce.com competitor), Bing, Skype, Azure (which competes with Amazon Web Services), plus some other minor services (like Microsoft Intune).
But it worries that its cloud products might not be as popular as its PC software products:
"While we believe our expertise, investments in infrastructure, and the breadth of our cloud-based services provide us with a strong foundation to compete, it is uncertain whether our strategies will attract the users or generate the revenue required to be successful."

Upside: Microsoft is making a lot of smart investments in its cloud. It opened Azure to Linux. It is letting Skype run as its own unit, maintaining support of Android and iOS and so on.

2. The two companies Microsoft fears most: Apple and Google.

Windows is still at the center of Microsoft and Windows now has more competition than ever:
"The Windows operating system faces competition from various commercial software products and from alternative platforms and devices, mainly from Apple and Google."

Upside: Microsoft's enterprise customers are in no hurry to ditch Windows PCs for Macs or iPads or Android tablets. A large portion are only now upgrading to Windows 7. Microsoft has some time to get Windows 8 fine-tuned before it risks losing these critical customers.

3. In the enterprise Microsoft has a LOT of competition.

Microsoft spent years trying to build high-end software for data centers. 
Microsoft named Hewlett-Packard as a competitor twice. It named IBM 10 times. It named Oracle 9 times. All three make integrated hardware and software. Oracle and IBM also offer a lot of business software that competes with Microsoft.
But Microsoft is also wary of CA Technologies, VMware, Adobe, Cisco, and SAP as competitors with its business software products. Even Intel got a mention, for competing with Microsoft's embedded systems products. Microsoft also named Linux at least a half a dozen times and Red Hat once.

Upside: As long as enterprises still want Windows devices, they will keep buying Windows Server and software that runs on it and manages it, which is its biggest, healthiest business right now. And Microsoft is the lower-cost option in some areas like databases.

4. Microsoft sees Apple and Google as threats to Xbox.

Microsoft warns, "In addition to Nintendo and Sony, our businesses compete with both Apple and Google in offering content products and services to the consumer." 
Neither Apple nor Google make gaming consoles, but they both make devices that let you stream entertainment to your TV.  Xbox is Microsoft's video-game console—which is also the company's best bet on the online-entertainment business.

Upside: Xbox Kinect made Microsoft cool again. An Xbox console is an affordable option compared to a lot of other Internet-connected set-top boxes which can't even play games.

 

5. IBM is a love/hate relationship.

Despite naming IBM as a competitor 10 times over, Microsoft is relying on IBM as a single-source supplier for chips for some of its hardware products like Xbox 360 and Kinect.
It's buying all of its RAM from one supplier, too—Taiwan Semiconductor Manufacturing Company. It will do the same for its Surface tablets. "Sole source suppliers also will produce key components of our Surface devices."

Upside: By giving all of its business to single-source suppliers, Microsoft gives itself a lot of leverage with them, even though it risks inventory supply if these vendors experience problems. 

6. The popularity of non-Windows smartphones and tablets could lure away developers.

Microsoft knows that all of its big plans rests on cool software. It needs lots of developers to write apps for Windows 8 and Windows Phone 8, which they won't do unless they think lots of people will buy those devices.
"Users may increasingly turn to these devices to perform functions that would have been performed by personal computers in the past. Even if many users view these devices as complementary to a personal computer, the prevalence of these devices may make it more difficult to attract applications developers to our platforms."

Upside: Microsoft has plenty of cash and in-house developers. It already owns wildly popular software like Microsoft Office and Halo. It can grease the wheels all on its own.

7. All this new stuff could succeed but will still erode margins.

Microsoft warns, "New products and services may not be profitable, and even if they are profitable, operating margins for new products and businesses may not be as high as the margins we have experienced historically."

Upside: Microsoft has one of the biggest R&D labs in the world. In its fiscal 2012, 2011, and 2010, it spent $9.8 billion, $9.0 billion, and $8.7 billion, respectively. Microsoft has enough cash to alter its businesses AND try and find the next big thing.

8. Everyone might hate Windows 8.

Steve Kovach, Business Insider

Windows 8 is such a big change that people may opt to leave Windows altogether.
Microsoft warns, "In fall 2012, we are launching Windows 8, a major new release of our PC operating system that seeks to deliver a unique user experience through well-integrated software, hardware, and services. Success depends on a number of factors including the extent to which customers embrace its new user interface and functionality, successfully coordinating with our OEM partners in releasing a variety of hardware devices that take advantage of its features, and attracting developers at scale to ensure a competitive array of quality applications."

Upside: The only true alternative to Windows 8 is a Mac. But most Windows 7 apps will run on Windows 8. That will probably be good enough to keep millions of Windows users happy and willing to grow through a Windows 8 learning curve.

Surface to arrive with Windows 8 on October 26, says Microsoft

Microsoft Surface: shown here with the accompanying 3mm-thick, pressure sensitive cover that doubles as a keyboard and trackpad.

(Credit: Microsoft)

Though it's not exactly an earth-shattering revelation, Microsoft has confirmed that Surface tablets will arrive October 26 along with Windows 8.
"The next version of our operating system, Windows 8, will be generally available on October 26, 2012. At that time, we will begin selling the Surface, a series of Microsoft-designed and manufactured hardware devices," Microsoft said in its annual report filed this week with the U.S. Securities and Exchange Commission.
Microsoft has said before that Surface products "would be available the same time that Windows 8" was launched, but it's reassuring to see the date in writing.
And, remember, those are Windows RT tablets only. The Intel-based Surface Pro is expected about 90 days later, according to Microsoft.
Microsoft has also peppered disclaimers throughout the annual report (these appear often in SEC filings) about the success, or lack thereof, of Windows 8.

In fall 2012, we are launching Windows 8...Its success depends on a number of factors including the extent to which customers embrace its new user interface and functionality, successfully coordinating with our OEM partners in releasing a variety of hardware devices that take advantage of its features, and attracting developers at scale to ensure a competitive array of quality applications. We expect to incur substantial marketing costs in launching Window 8 and associated services and devices, which may reduce our operating margins."

That last part about "may reduce operating margins" is something Wall Street will of course be watching closely. In short, if Windows 8 is not relatively successful, this may fuel doubts about Microsoft's viability in the age of the iPad and Android.
The Surface products will be offered in basically two forms. One is expected to be a more price-friendly version running Windows RT on top of ARM chips. The other, likely a bit pricier, will run Windows 8 Pro on top of Intel "Ivy Bridge" processors.
And pricing? While there's a lot of whacky speculation about sky-high pricing, Microsoft's own guidance portends a more rational pricing scheme.
"Suggested retail pricing will be announced closer to availability and is expected to be competitive with a comparable ARM tablet or Intel Ultrabook-class PC," Microsoft said in a statement.
Based on that statement, a back-of-the-envelope estimate could put -- the operative word here is "could" as this is simply speculation -- Windows RT products as low as $500-$600 and Windows 8 Pro Intel-based products ranging up to $1,000, or possibly higher.
That said, Microsoft's pricing plans are undoubtedly in a state of flux, and we won't know until the company tells us.

Mountain Lion Vs. Windows 8: Which One Is Better?

Apple released the latest major upgrade to its desktop operating system, OS X Mountain Lion, earlier this week. Also this week Microsoft announced the release date of Windows 8, the massive overhaul to Microsoft’s platform that finally makes Windows friendly to tablets, coming October 26.
After a period where both OSes were remarkably similar, they’re now more different than they’ve been in a long time. Of course, Windows 8 won’t be final for a few months, but the Release Preview has been available since the end of May, and the feature set is very close to finished.
With Mountain Lion serving as the anchor on the Mac side, it bears a new look at how the two OSes hold up against each other.

Similar Goal, Different Approach

Broadly, both systems are trying to achieve a similar goal — making the desktop experience more seamless with mobile devices — but they do so with somewhat different philosophies. Apple is borrowing many of the more popular features of its wildly popular iOS platform (iPhones, iPads and iPod Touches), building desktop versions of some iOS apps (like Messages) and integrating other useful features that first appeared on mobile (like AirPlay Mirroring).
Microsoft, on the other hand, adopts a more holistic approach, revamping Windows in its entirety to make it friendly to both desktops and mobile devices like tablets and laptop hybrids (which “transform” into tablets). It’s the same OS in both places.
That leads to some big gaps in what each OS does, though the goal is the same: Give consumers a comprehensive ecosystem that fulfills as many of their needs as possible without going outside of it. In this comparison, I looked specifically at four factors:

• Sharing
• Personal Apps
• Photos
• Cloud Services

Let’s get started, and remember: While Mountain Lion is for sale now, Windows 8 isn’t final yet, and some aspects may change before its release this fall.

1. Sharing

Mountain Lion builds sharing right into the OS, letting you share things (like websites, videos, etc.) from individual apps. Apple’s Safari browser is the app that best showcases this ability, where users can call up a drop-down menu of sharing methods (such as Twitter or email and, soon, Facebook).
Even better is how Apple’s Mail app works with Safari to improve sharing… if you’re sharing a URL, the app will ask if you want to share just the link, the entire web page, the Reader version of the page (which strips out photos, ads, and the like), or a PDF of the page. Nice.
Windows 8 sharing is arguably superior, with Share being one of the five “charms” on the system’s main menu, which users can call up at any time, in any app. Just click or touch Share and Windows will immediately call up a list of apps that will let you share.
For now, that list is pretty limited (typically just Outlook), but when Windows 8 launches, you can expect heavyweights like Facebook and Twitter to be involved. Bonus: The apps you use most often to share will be at the top of your list.
Both Mountain Lion and Windows 8 put the power to share in the hands of app developers. If you’re developing an app for either OS, you can designate content that’s shareable. On OS X, however, it’s up to the developer to create the button or drop-down menu for sharing, while on Windows 8, it’s hard-wired into the interface.
That gives Windows 8 and edge, though it’s up to developers to take advantage of it.

2. Personal Apps

Both platforms have a suite of personal apps for connecting with people and staying organized. Apple Messages replaces iChat and integrates your messages from iPhone and iPad into one place. The new Reminders app similarly works with its mobile versions, and the Calendar of course syncs with your mobile devices via iCloud (not a new feature), as does Contacts (the new Address Book).
Windows 8 has similar apps that they work similarly, but with important differences. Microsoft’s version of Contacts (called People) can tie into Facebook, and shows you “What’s New” with the people you interact with.
Also, Windows 8′s Messaging app connects only with Windows Live Messenger and Facebook. While other services may join that list in the general release, it’s worth pointing out Facebook isn’t an option with Mountain Lion’s Messages (for now).
The full capabilities of both OSes won’t be realized until the fall. Obviously, Windows 8 won’t be officially out until then, and that’s the same time iOS 6 should launch, which will make Messages work better with iPhones and iPads (there are still some issues with text messages that Apple is ironing out).
Still, the edge goes to Apple here for its well thought-out integration of the mobile side of things.

3. Photos

Microsoft puts photos front and center in Windows 8 with an app called simply Photos. It doesn’t just show photos stored locally on your drive — it can also tie into Facebook, Flickr and photos you store in the cloud via SkyDrive.
Apple, of course, packages iPhoto with every Mac. iPhoto is a basic image organizer and editor, and it can also import all the images you take on your iOS devices, thanks to iCloud. Facebook and Flickr integration is limited to exporting.
Still, Apple’s app is more powerful than Microsoft’s (those basic editing abilities make a big difference), although Windows still comes with the Paint app if you need to edit. It comes down to differing goals here — Photos aims to be a simple hub for accessing and sharing all your photos, whereas iPhoto is more of a centralized command center for your photo collection.
Until Microsoft expands the number of services it can tie into, Apple wins again.

4. Cloud Services

Looking at the cloud services between Windows 8 and Mountain Lion is really an apples-to-oranges comparison. Whereas SkyDrive has a visible file structure, and users can upload whatever they want, iCloud is more of a syncing service, ensuring certain types of content in one place show up in another.
SkyDrive provides an extremely capable service for saving documents to the cloud (similar to Google Drive), and it’s built into many key apps. Office 2013 will use SkyDrive as the default place to save documents, letting you access them from anywhere, on any machine. It also allows for Microsoft to update things like document templates at anytime.
With Mountain Lion, iCloud now syncs documents in the cloud as well, and of course it still syncs photos, contacts, calendars and the like across all your devices. However, iCloud has some serious limits. It doesn’t yet sync videos, and its calendars aren’t shared in the same way as other services (like Google Calendar), so they’re not as easy to integrate. Also, there’s no file structure that users can access.
As for which is better, it depends on which philosophy best matches your life and workflow. Would you rather have your own “locker” where you can put anything you want? Or would you rather not worry about where anything is, and just let your system handle it — with the tradeoff being a more limited set of apps being able to sync through the cloud? Both approaches have merit.

A Fork in the Road

For a long time the computer was more of a standalone device, the primary gateway to a person’s digital life. What such a system needed to do was pretty clear, and as a result, Macs and PCs became different flavors of the same computing recipe. Sure they tasted different, but it was still soup.

Although it’s often said to be the one thinking different, Apple actually has the more conservative take on computing.

It’s a different world now, though, with mobile devices playing a greater and greater role in our lives. Consequently, the two heavyweights in personal computing are diverging once again — Mountain Lion and Windows 8 are really quite different in their approaches to address the needs of today’s digital consumers.
Although it’s often said to be the one thinking different, Apple actually has the more conservative take on computing, with Mountain Lion integrating the best aspects of iOS devices. The change with Windows 8 is much more radical, adopting touch, the cloud and an entirely new desktop design (Metro) in an effort to create an OS that works just as well on traditional PCs as tablets.
One big caveat there: The familiar desktop is still around in Windows 8, just a click away. Microsoft is in a sense trying to have its cake and eat it too with Windows 8 — changing everything, but keeping the old environment if users get skittish.
Is either approach superior to the other? In some ways, yes. Since Apple is changing less with Mountain Lion than Microsoft is with Windows 8, the new OS X feels much more seamless than Windows 8, even when taking into account the bugginess of pre-release software. On the other side, some aspects of Windows 8, like Sharing, feel very powerful, but it’s an open question whether their full potential will be unleashed.