Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), Google Inc (GOOG): What Microsoft Corporation (MSFT) Needs

On Aug. 23, Microsoft Corporation (NASDAQ:MSFT) CEO, Steve Ballmer, announced his retirement after 12 years leading the technology giant. Following the news, the stock soared 7%. The message from shareholders was clear: Mr. Ballmer, don’t let the door hit you on the way out.

Microsoft’s lost decade
Ballmer’s retirement is long overdue. Under his watch, the company went from a widely feared behemoth to a firm that’s fighting to stay relevant. Over more than a decade, Microsoft Corporation (NASDAQ:MSFT) has missed every major technological development — search, online advertising, social networks, and others. The company’s shares have languished. Granted, Ballmer did take over at the height of the technology bubble.

Microsoft Corporation (NASDAQ:MSFT)

The company’s old Windows and Office monopoly is under attack. According to Gartner, PC sales declined 10.9% during the second quarter, marking the fifth consecutive quarterly decline in desktop shipments. Tablets have been gaining market share at the expense of PC sales, and the trend hasn’t been reversed by Windows 8. On the contrary, Microsoft Corporation (NASDAQ:MSFT)’s new operating system might actually be accelerating the decline of the PC industry.

Most troubling is Microsoft Corporation (NASDAQ:MSFT)’s inability to adapt to the mobile computing age. In July, the company took a $900 million charge to reflect growing inventories of unsold Surface RT tablets. The Windows Phone is showing some signs of life, but its launch could be described as lukewarm at best.

In contrast, Microsoft Corporation (NASDAQ:MSFT)’s competitors have completely taken over. When it comes to tablets, Apple Inc. (NASDAQ:AAPL) is the leading manufacturer in the high end of the marketplace. The iPad Mini has been a big success for the company, providing a more affordable alternative to premium models. Apple Inc. (NASDAQ:AAPL) is still, by far, the biggest tablet maker with 32.4% of the market share.

At the same time, just as it did with smartphones, Google Inc (NASDAQ:GOOG) has leveled the competition with its incredibly popular Android operating system. The platform is growing faster than Apple Inc. (NASDAQ:AAPL), thanks to high demand for lower-priced products, especially in emerging markets. According to estimates by IDC, Android-powered devices made up 62.6% of tablet sales during the second quarter.

Remember, when Ballmer took over in 2000, Apple Inc. (NASDAQ:AAPL) was on the verge of bankruptcy, and Google Inc (NASDAQ:GOOG) was a Ph.D science project.

What Microsoft needs now
Microsoft Corporation (NASDAQ:MSFT) did not lack the resources to capitalize on these missed opportunities. Indeed, its near-monopoly on the desktop provided the company with the fat margins needed for research and development.

But, rather than innovate, it employed the strategy of being the first to profit. Microsoft chose to build its own versions of proven technology, as opposed to creating new devices from scratch. Netscape versus Internet Explorer is a great example. By owning the operating system on nearly every computer, Microsoft managed to crush the smaller rival, despite its late entry into the browser wars.

This worked when Microsoft was stronger than its competitors, but things are different today. Judging by the company’s long list of product failures — the Surface and Zune come to mind — Microsoft no longer has the brute strength necessary to deploy this strategy.

Microsoft needs to transform its culture to move like a challenger, and not like the leader it once was. A change at the top is the first step in this process. But, the transformation must trickle down to the rest of the organization.

Foolish bottom line
Ballmer was the wrong person to lead Microsoft Corporation (NASDAQ:MSFT). He’s a business type with a sales and marketing focus. But, in times of change, a visionary is needed. An engineer or product maverick is required. That’s the leader Microsoft needs if the company is to revive its fortunes.

The article Goodbye Mr. Ballmer: Here’s What Microsoft Needs Now originally appeared on and is written by Robert Baillieul.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.