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Microsoft Corporation (MSFT) Continues to Underperform, but for How Long?

Microsoft Corporation (NASDAQ:MSFT) seems to have lost its last chance for revival as the company’s latest offerings fail to perform in accordance with expectations. The tablet ‘Surface,’ which was considered to be Microsoft’s strongest chance at getting back on track, failed to exhibit any impressive sales, therefore rendering Microsoft Corporation (NASDAQ:MSFT) in an even worse condition. Recently, multiple factors have been playing against Microsoft. Among them are the diminishing market for PCs and the growing markets for tablets and smartphones. Microsoft still holds a leading position in the PC market with the most popular software for PCs. However, in this new PC plus era, Microsoft Corporation (NASDAQ:MSFT) seems to be losing its hold where it was once unshakable. Microsoft attempted to bridge the gap between PCs and tablets through its new operating system, Windows 8, but the new OS has failed to catch the attention of the market. These factors are giving rise to significant doubts regarding the future of the company. If Microsoft Corporation (NASDAQ:MSFT) does not come up with a strong competitive strategy, the company will continue to decline. Although investors and analysts do not hold any great expectations, representatives of the company are highly optimistic for 2013.

Microsoft Corporation (NASDAQ:MSFT)Competitive Environment

The biggest factor causing a serious decline in Microsoft’s position in the market is the extensive rise in competition. The biggest competitor of the company is Apple Inc. (NASDAQ:AAPL) . Apple competes with Microsoft Corporation (NASDAQ:MSFT) in almost all aspects of its business. Apple’s Macbooks provide tough opposition to Windows-based PCs; on the other hand, Apple already holds the leading position in the tablet and smartphone market, which Microsoft Corporation (NASDAQ:MSFT) has recently entered with the Surface tablet and Windows-based smartphones. Although Apple is witnessing a steep decline in its market performance, it is still in a much better position when compared to Microsoft. Apple’s financial performance for the fourth quarter of 2012 shows a profit margin of 23.99%; Microsoft’s profit margin for the same period stands at 29.72%. Microsoft’s higher figures can be attributed to increased revenue from its new devices.

Another significant competitor of Microsoft is Google Inc (NASDAQ:GOOG). Google holds the strongest position in the IT industry at the moment with its shares being traded at around $800. Meanwhile its 52-week high stands at $808.97. Google has maintained its strong position by being innovative and by diversifying its services. Google competes with Microsoft through its Android OS and multiple other services. Google holds a significant share in the smartphone market and the Android-based smartphones are making it difficult for the Windows-based smartphones to make their mark in the market. Google’s profit margin for the fourth quarter of 2012 was 20.16%.