Let me be clear. I'm not a fan of Microsoft (NASDAQ:MSFT). I dislike its products and I don't much like its business policies. I'm a child of the open source world and a fan of cloud computing, and Microsoft has long been a dirty word as far as I'm concerned. It's probably a dirty word as far as many investors are concerned. The stock would hardly have made you any money if you'd held it for the last decade - despite doubling its earnings over that period. And yet... as an investor, I could get interested in Microsoft. Let me explain.
You would assume that growth is difficult for Microsoft to achieve. It seems to have nowhere to go. It already dominates the desktop and client-server market, indeed such is its dominance that it's faced increasing regulatory action from competition authorities. Vista seems to have been a massive own goal - an operating system that many complained really messed your computer up if you were brave or foolhardy enough to install it. It's perhaps not surprising then that businesses are queuing up to buy the new Windows 7 - not because they need the new version, but perhaps simply to escape the dead hand of Vista. Though Windows 7 is increasing its share of the market much faster than previous versions [1] , that's mainly because it's cannibalising other versions of Windows. Microsoft's total market share actually fell from 92.5% to 91.6% in March 2010 - while Linux has made almost no inroads at all, netbooks and smartphones are beginning to change the game.
So Microsoft is slowly losing share of its operating system market. It's lost very significant share in web browsers - partly due to competition authorities demanding it unbundle its Internet Explorer on software-pre-installed PCs - and though it's launched its own search engine, Bing, it's a very distant runner-up to Google in that market. But the biggest threat to Microsoft is that the computing world is going through another of those huge transformations that make or break companies. Microsoft thrived, and other companies died, when we moved away from supercomputers towards desktop PCs - from huge monoliths of computing power to distributed, client-server systems. Now we're moving again, away from locally installed applications towards a universe in which…
