Microsoft choking on tablets?

Windows LogoMicrosoft is facing a fall in profits prompted by a decline in global PC sales caused primarily by the growth in demand for tablets and mobile phones.

The company and its investors are hoping that its latest push into the mobile and tablet markets will bring some relief; phones running the latest Windows mobile software were being pushed heavily at CES and a beta version of Windows 8, the touch-enabled and mobile/tablet friendly operating system is due for release in February.

But has Microsoft left it too late? It wouldn’t be drawn at CES on a release date for the new Nokia Lumia 900 phone although it is planning to put plenty of marketing resource behind the device when it does become available. Similarly there is no release date for Windows 8 although it’s likely to be at least six months after February’s beta release and could be longer. In the fast moving mobile and tablet markets could these delays cost Microsoft more than a dip in profits? Could we be seeing the beginning of the end of Microsoft as a force in the technology market?

The world is going mobile and PC sales will continue to suffer as a result. Microsoft has tried to diversify into markets such as search and gaming but it is still heavily reliant on PC sales. In 1990, Microsoft was considered to be one of the four leading technology companies along with Intel, Dell and Cisco. In a recent survey by CNNMoney to find today’s top four, Microsoft did not feature. Technology experts and readers picked Apple, Google, Amazon and IBM (Facebook was not in the survey included as it is a private company); mobile phones, tablets and cloud computing are now driving technology innovation, not the PC.

This is reinforced by data from Gartner which estimates there will be more devices running mobile operating systems than PC-based systems by 2014. And Gartner also announced last week that global sales of PCs fell 1.4% in the fourth quarter of 2012 due in part to the competition from tablets but also due to the economic climate and a shortage in disk drives caused by the floods in Thailand.

The story gets worse for PC sales. Horace Dediu, who tracks market data on his Asymco blog, recently shared the following graph which shows a “brief history of personal computing platforms”:

Personal computer history

This clearly shows Apple and Android devices eating into the market share of PCs to the point where they now represent 50% of sales. Whilst the Apple sales figures include Macs the trend is clear and with it the imperative for Microsoft to crack the mobile market.

Microsoft is still a key player in the technology market but it is not the force it once was. Mobile devices and the move towards the cloud represent significant challenges for the company. The next 12 months will tell us whether Microsoft can be a major player in the mobile market and whether it can regain its position as one of the world’s leading technology companies.

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