Four Reasons Microsoft Has Fallen So Far Behind Apple And Google

23 July 2015 -

Once the premier technology company in the world, Microsoft continues to wither in the face of rivals Apple and Google, after reporting a £2bn net loss during the last quarter. But what mistakes have led to the collapse of this computing giant?

Jermaine Haughton

Microsoft’s losses of £2bn in the three months leading to June 30 sit in sharp contrast to the £2.94bn profit made exactly a year earlier. Revenue during the same period also sunk by 5% to £14.2bn.

Of course, Microsoft’s chances of making profit were effectively killed by the posting of £5.37bn worth of write-downs, including the £4.8bn charge for effectively abandoning its loss-making Nokia mobile phone business.

In a transitional year for Microsoft, as the company attempts to transform to fit the strategy of chief executive Satya Nadella, net profit for the full year more than halved to £7.8bn, but revenue rose from £4.28bn to £59.8bn.

The firm is undergoing a change of direction to a “mobile first, cloud first” approach to counter the malaise in PC sales, and the after-effects of reacting to the popularity of applications, portable devices and the internet all too late under former chief Steve Ballmer.

The launch of Windows 10 is the first official opportunity for Microsoft under its new leadership to lay down a marker to the public of its plans to set the trends in the tech market, rather than follow.

Here are the four major strategic errors Microsoft has made that led to the demise of the corporation from industry leaders to also-rans.

Windows 8

Critics often joke Windows 8 was such a disaster that Microsoft have opted to launch Windows 10 rather than Windows 9 to distance themselves from the flop as much as possible.

The main problem with Windows 8 was its usability. Compared to the traditional design of 1995 and XP editions, many users were confused by the vastly different user interface of 8. The coloured tiles on the Start screen, for example, were made to allow tablet users to manage and start apps, but became clumsy and irrelevant.

This led to significant problems with IT workers, as well as regular customers, who switched to Apple, opting for simpler functions to improve productivity.

According to NetApplications, Windows 8’s highest penetration came in September 2013, when it reached 8.02% percent. By comparison, Windows 7 peaked at 60.98% just three months earlier.

Mobile

Microsoft’s late arrival into the smartphone market is one of its biggest mistakes and it continues to pay the price for it today.

Alongside the billions in write-downs for Nokia, the corporation also released 7,800 staff with most working for its mobile phone division. Although sales of its Nokia Lumia range are improving thanks to cheaper devices, and tech experts rank the products highly, the

Windows Phones are failing to make any money, as Google’s Android and Apple’s iOS dominate global market share and profits respectively.

Fundamentally, the product is also suffering from a lack of app developer interest and no consistent support from global phone brands like HTC, Samsung, Sony, and LG.

Search

Similar to mobile, Microsoft was late to realise the profitability of internet search facilities. By the time its search engine Bing was launched in May 2009, competitors Google had already usurped Yahoo as the standout online search website, netting more than £3bn in revenue per quarter.

Despite investing in expensive data centres and marketing campaigns, including a Pepsi Challenge-style challenge under Ballmer, Microsoft failed to make a dent in Google’s two-thirds market share, and lost hundreds of millions each quarter during the process.

Unlike Windows Phone and Windows 8, there seems to be life left in Bing, with the search engine acquiring 20.1% of US search traffic as Google’s paid search spending growth begins to slow dramatically.

Cloud

Continuing the on-running theme of Microsoft running late to the party, the multi-billion pound firm is only recently beginning to gain traction in the growing cloud technology service.

When then-boss Ballmer first publicly mentioned Windows Cloud in 2008, it was clear Microsoft understood that cloud computing was an interesting area, but did not know exactly how it would fit in with their operating system. This allowed Google and Amazon time to add cloud computing to their array of web-based services, gaining a foothold in the market before Microsoft finally released its Azure system in 2010.

According to market research firm IDC, the cloud computing industry will grow to more than £81bn by 2018, from £36bn in 2014. And although the company remains competitive in the field, Amazon remains the cloud leader by far, and recent reports suggest Microsoft is finding it difficult getting B2B customers to actually use its cloud services, threatening to halt its rapid growth.

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