Is It Too Late for Microsoft?

Get ready for another round of Apple (Nasdaq: AAPL  ) versus Microsoft (Nasdaq: MSFT  ) . First, it was Bill Gates versus Steve Jobs. Now, it's Steve Ballmer versus Tim Cook.

"We are trying to make absolutely clear we are not going to leave any space uncovered to Apple," Ballmer said at a partner conference in Toronto this week. "We are not leaving any of that to Apple by itself. Not going to happen. Not on our watch."

OK, but... Didn't this already happen? Didn't Ballmer mock the iPhone when it first came out? Didn't Microsoft pioneer and then abandon the tablet space? It's a little late to be taking Apple seriously, Mr. Ballmer.

Or is it? The history of the consumer technology industry shows that it's almost never too late for any competitor to make a serious comeback. Microsoft destroyed Netscape after ceding the browser market in its early days. Netflix buried Blockbuster when it devised a better system for DVD rentals. Google (Nasdaq: GOOG  ) buried Yahoo! in U.S. search before Baidu took over the search market in China. Early leaders don't always stay ahead.

And that's a problem for Apple. See, despite its pedigree as author of what might be the greatest comeback story in the history of business, Apple is an early leader in at least two key markets: smartphones and tablets. Ballmer wants to knock the Mac maker from its comfy perches.

How far will he go? Windows 8, which comes out in the fall, could be a big winner for how it leverages common tools to help developers write code that runs across desktops, phones, and at least some versions of the forthcoming Surface tablet.

Hardware innovation could also come into play. According to tech blog Slash Gear, Ballmer acted coy when asked about the possibility of Microsoft designing its own branded Windows Phone. To date, Mr. Softy has relied on partners such as HTC and Nokia (NYSE: NOK  ) in the same way that Google has come to depend on Samsung for Android devices.

An Apple a day
What strategy Microsoft chooses isn't as important as the very act of choosing to fight. Billions of dollars will be put to work in pursuit of further breakthroughs, which should deliver ever more advancements into the hands of users while fueling returns for investors in both stocks and many more. Indeed, these are the sorts of hidden winners we scout for in our Motley Fool Rule Breakers newsletter service. Want in? Click here for a 30-day free trial subscription.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Google, and Netflix at the time of publication. He also had a long-term call position in Netflix. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Apple, Baidu, Google, Microsoft, and Netflix. Motley Fool newsletter services have recommended buying shares of Apple, Netflix, Baidu, Microsoft, and Google. Motley Fool newsletter services have recommended creating bull call spread positions in Apple and Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (9) | Recommend This Article (5)

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  • Report this Comment On July 11, 2012, at 4:37 PM, melegross wrote:

    The first assumption is that Microsoft has what it takes to compete here. The evidence so far is that it does not.

    If failed against the iPod. It's failing against the iPhone, and now Android. Even the Mac has been making a comeback.

    So far, Surface is vaporware. They showed nothing of note in their introduction, preferring to spend all their time showing off the case, kickstand, and keyboard covers.

    None of that is competition for the iPad. What was most interesting was that they only spent about two minutes showing software, and except for 15 seconds with Netflix, it wasn't even working software.

    The reaction to Win 8 so far has been mixed, at best.

    So it's nice that they want to directly compete, but there's little evidence that they are capable of it.

  • Report this Comment On July 11, 2012, at 4:39 PM, deemery wrote:

    Well, -Microsoft- can be a fierce competitor. But not under Ballmer! I'd bet against the company as long as he's running it, and if I were a stockholder I'd be asking "Why are you still here?"

  • Report this Comment On July 11, 2012, at 4:44 PM, lucasmonger wrote:

    Will the Surface and rumored phones fail like Zune and Kin? Only time will tell. My gut tells me that it's too late for Microsoft. They are too big with too much bureaucracy to be able to compete with their nimble competitors. But the have deep pockets and can throw lots of money at it. The only problem is that in the process of supporting phones and tablets with a touch interface, they might alienate everyone in the PC space with the wonky user interface that shows down the laptop/desktop experience. As horrible as the Vista release was, Windows RT and Windows 8 might make or break Microsoft (Microkia)

  • Report this Comment On July 11, 2012, at 4:52 PM, lucasmonger wrote:

    As for Surface itself, although the integrated keyboard and kickstand seem like a good idea, those pieces add some inflexibility to the device.

    Case in point, the Surface is trying to be an ultra book, but with the magnetic, flexible keyboard hinge, you can't use this on your lap. The kickstand requires a surface like a desk. When you tear the keyboard off and use it like a tablet, one wonders how the software keyboard and pointing device (mouse/trackpad) will actually work, and whether it will work well.

    I think they are also going to confuse the heck out of the average user with two models (Intel vs. ARM CPU), two operating systems (Windows 8 and Windows RT) and two price points. Someone will buy the cheaper one thinking they can run all of their favorite PC apps and get very disappointed. Purchasers of the more expensive one and wonder why they didn't buy an ultra book with a bigger screen and the ability to use it on their lap at the airport or on the plane. Is it a tabbook or a lappet? Make the ARM tablet 10 inches and the Intel tablet 13 and 15 inches, then you might have something.

  • Report this Comment On July 11, 2012, at 4:54 PM, toadaly wrote:

    You should ask RIM how much advantage there is to being first to market. Apple will remain king only as long as consumers view their products as best. I know a lot of people with iPhones who are unhappy with them and plan to switch to Android.

    If Microsoft presents a hit, like it did with XBox, they will sell as many as they can make. It needs to boot instantly, not crash, and work seemlessly with other devices. If they can pull that off, they will probably have a hit.

  • Report this Comment On July 11, 2012, at 5:07 PM, JohnCLeven wrote:

    I'm pretty sure a company that has had a ROIC over 30% every year, for the past 5 years, can compete.

  • Report this Comment On July 11, 2012, at 5:11 PM, deemery wrote:

    "I'm pretty sure a company that has had a ROIC over 30% every year, for the past 5 years, can compete."

    I dunno about that. RIMM had similarly juicy financials for a while, as did Nokia.

  • Report this Comment On July 11, 2012, at 5:54 PM, CameraFTP wrote:

    When a company has $60Billion in cash, and generates a positive cash flow of over 25Billion/year, you simply cannot call it is too late. I have many friends in the business world, and almost all of us are excited about the new Surface tablet. It will relegate iPad into a cheap toy for the kids.

  • Report this Comment On July 11, 2012, at 7:49 PM, techy46 wrote:

    Apple needs to do something with their $100b capital that's sitting idle. Microsoft's doing something with their $60b capital. If Microsoft bought Nokia and contracted for Nokia to make Lumia phones and Surface tablets then Microsof tcould be a $100b hardware and software enterprise really quick. Apple has no enterprsie strategy and that could mean trouble down the road.

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