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Time is ticking for Microsoft (NASDAQ: MSFT ) . With the sales of mobile devices having already overtaken PCs, the total number of in-use Internet-connected mobile devices will overtake desktop computers some time this year, and Microsoft is still fumbling in the mobile arena. If the company can't get mobile right, investors will pay the price for Microsoft's missteps.
The days of desktop dominance are over
Microsoft has been the king of desktop productivity for decades. More than 1 billion people worldwide use its Office program, which made up 30% of the company's revenue in 2011. But PC demand is slowing, and in 2013 there will be more Internet-enabled mobile devices than desktop computers for the first time ever.
Here you can see the move to mobile, with projected global installed base units (the actual number of units in use) through 2015.
This has implications not just for traditional revenue streams for Microsoft, but also for the company overall. Microsoft sees the trend, just like everyone else does, and its Surface tablet and Windows Phone OS are trying to meet mobile head-on. But the problem for Microsoft is that its competitors are already there.
A code not easily broken
Microsoft may have dominated the desktop era, but its competitors are flying high in the mobile age. The company's decades of software experience aren't giving it a leg up in the mobile application world. Microsoft lags far behind Apple's (NASDAQ: AAPL ) app ecosystem.
As of November, Apple boasted more than 700,000 apps in its App Store. The Google (NASDAQ: GOOGL ) Play store followed behind with about 500,000 apps. Meanwhile, Microsoft stumbles along with just 150,000 apps in the Windows Phone store. To Microsoft's credit, though, the company has doubled the amount of apps since last year.
But the number of apps itself isn't as important as what the number represents: developers spending time with the platform. Here are what platforms developers want to make apps for, based on a recent Appcelorator/IDC survey of more than 5,000 developers.
Microsoft will have to convince developers that its Windows mobile platform is worth developing for. The best way Microsoft can do so is through strong Surface and Windows Phone sales.
So far, Windows Phone accounts for just 2.7% of all smartphones purchased in the past three months, and Microsoft CEO Steve Ballmer recently said that Surface sales have been "modest." So far, the combination of those two mobile pursuits isn't encouraging compared with Apple's and Google's dominance in the smartphone and tablet markets.
Adding it all up
When you look at Microsoft's offerings, things don't look too bad. The company's marketing the heck out of the new Surface tablet, and it's partnered with one of the largest smartphone makers in Nokia (NYSE: NOK ) Last quarter, Nokia surprised investors by moving 4.4 million Lumias. Better yet, consumers seem to be taking to Windows Phone and Nokia. A recent Changewave survey showed customer satisfaction of Windows Phone topping Android, with Nokia's customer satisfaction edging out Samsung.
Recent evidence seems to confirm Microsoft has a strong offering in the mobile space that consumers are satisfied with once they purchase it. The problem is that Microsoft is fighting competitors that already reign over the mobile territory.
Mobile isn't the only part of Microsoft's business. The company just sold more than 40 million copies of Windows 8 since its launch in October. But the Redmond, Wash.-based company needs to become a major player in mobile. With consumers moving toward mobile-based software and devices, Microsoft investors should be concerned if the company can't chip away at larger portions of the tablet and smartphone market in 2013. Foolish investors should also watch for app development in Microsoft's mobile platform. Microsoft can't afford to fumble the mobile experience for its customers. To help investors understand the company's current position, The Motley Fool has put together a brand-new premium report on Microsoft. Our analyst explains the opportunities and challenges for Microsoft and gives regular updates as key events occur. So make sure to claim a copy of this report now by clicking here.