This time, though, Microsoft seems to be trying a different tack. Huston says the real focus is on making Windows 7 the software that runs the next wave of netbooks and tablet computers. Both the smart phone and PC industries are quickly merging toward these larger devices, which will be sold by mobile carriers much like cellphones are today (cheaply, and attached to long-term data contracts). “In five years it’s going to be hard to tell what’s a PC and what’s a phone,” says Huston. “It may be more a conversation of what screen size do you want, or do you want a hard drive or a flash drive?”
The potential stakes here are massive. While there are 1.4 billion PCs in the world, there are three billion phones, notes Huston. Mobile is one area where “we can’t afford to lose,” he says. Of course, Microsoft isn’t the only company with an eye on this emerging market. Apple has been developing its own tablet computer, which is rumoured to look like an oversized iPhone. Google already has a mobile operating system called Android, which Microsoft sees as its biggest threat.
Both these companies have also proven capable of doing real damage to Microsoft. Apple has scored with its long-running series of cutesy “I’m a Mac” attack ads, which have proven to be a major embarrassment for Microsoft. Google, meanwhile, has been rolling out a series of competing products—from online software that mimics Microsoft Office to an online operating system called Chrome OS. “One of Google’s goals is to put Microsoft out of business and they’re hardly being subtle about it,” says Enderle.
But as Microsoft gets its act together, those attacks may come back to haunt Apple and Google, adds Enderle. Microsoft has shown lately that it’s willing and able to fight back. With Bing, its share of the hugely profitable online search business was up nearly 20 per cent in August. In just three months, it’s become a brand that’s recognized by half of Americans, says Microsoft. A new video game system called Project Natal, which uses motion sensors to follow a player’s movements, is grabbing attention among young video gamers, helping the company win back some of the cool factor that Apple has long enjoyed. And new ads that embrace the PC moniker have helped take the sting out of Apple’s attacks.
Over the past year, the mood at Microsoft was often sombre. Those attacks against Vista and Microsoft’s image problems took a toll on morale, says Huston. But that too, has changed. Nowadays, employees walk with an extra kick in their step, he says. Even the often highly critical blog Mini-Microsoft, which is written by an anonymous employee, is on board. “I’ve got to say: in my opinion, Microsoft has turned The Corner,” it said.
Microsoft still shows hints of its old, unhip self. It has been running an online ad campaign for Windows 7 urging people to host their own launch parties in their homes. The cringe-worthy ads have been widely mocked online. Make fun of them if you will. Huston says for all the criticism, Microsoft is, at the end of the day, just a bunch of “geeks” whose only mission now is to make great software.
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