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.

Microsoft Corporation (MSFT): Scapegoat to an Industry

PC shipments for the first quarter of 2013 dropped 14%, with PC makers moving just over 76 million units.  The decrease is apparently the largest such drop since tracking shipments began in 1994 (according to Bloomberg).  Writing for Bloomberg, Aaron Ricadela wastes little time in identifying the company to which everyone’s fingers seem to be pointed in directing blame, to a large extent, for the decline — Microsoft Corporation (NASDAQ:MSFT), and its Windows 8 operating system.  Joining the lynching party are VG24/, and The New York Times.  The finger pointing is itself due, in large part, to the International Data Corporation — IDC — and one of its vice presidents (Bob O’Donnell), who said “(a)t this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market.”

Microsoft Corporation (MSFT)

And so it goes. If there is a problem, the problem must have a cause; PC sales are down, and the vast majority of PCs use one version or another of Microsoft Corporation (NASDAQ:MSFT)’s Windows operating system; the most recent iteration of the Windows OS is Windows 8, which has had trouble attracting users; therefore, the decline in PC sales is due to consumers’ dislike of Windows 8.  Q.E.D.  But let’s be fair — declines in PC shipments cannot simply be dropped at Microsoft’s door like a UPS delivery.

Apple’s contribution

The criticism of Microsoft Corporation (NASDAQ:MSFT) overlooks the fact that the technology environment has evolved significantly, and has done so not always in response to Microsoft’s prompting. Apple Inc. (NASDAQ:AAPL) has been at the leading edge of much of the tech industry’s development, particularly when it comes to consumer products.  Currently third in the U.S. PC market, Apple only has a 10% share — hardly enough to have the same sort of impact on PCs as Microsoft.  Apple does, however, excel in developing new consumer products, as well as being adept at taking existing concepts to new levels of sophistication.  iPods, iPads, iPhones, etc., have all taken the computer to new realms of consumer utility, for all intents and purposes initiating a movement away from the “traditional” desktop PC.

The transition to smaller devices (including the MacBook laptop computer – for which Apple hasn’t yet invented an i-name, apparently, even though the MacIntosh computer has morphed into the “iMac”) cannot be passed off as the introduction of simple auxiliary devices to augment the desktop PC.  Laptops, tablets and smartphones bring substantial power of their own to the table, and add something the desktop PC will likely never have:portability.

Put briefly, the market for PCs has shrunken as smaller computers bring new capabilities. Apple Inc. (NASDAQ:AAPL) isn’t the only company involved in this evolution, but it has typically led the process.  Of course, as the market shrinks, so too will the number of PCs needed to accommodate that market.

OS wars

While desktop PCs and laptops were dominant, Microsoft Corporation (NASDAQ:MSFT)’s Windows OS was dominant; Apple’s proprietary OS (currently OS X) was limited to the Apple environment.  As smaller devices have taken the stage, however, new operating systems designed to optimize full-featured performance on a smaller physical platform were developed, and Microsoft has appeared (to me, at least) to be playing catch-up rather than leading the field.  Apple Inc. (NASDAQ:AAPL)’s iOS (which I’m sure was a difficult designation to come up with) has become the standard for iPads, iPhones and iPods; but rather than seeing a burgeoning Windows presence, the last few years have seen the ascension of the Android operating system.

Android, Inc. developed the Android OS with the assistance of Google Inc (NASDAQ:GOOG), with Google ultimately buying Android Inc. Designed to operate on the small platforms provided by smartphones and tablet computers, Android quickly became a major player in the small device universe, accompanied as it was by a body of applications developed by and for Google.  Based on the Linux programming language (an open-source language with a broad base of developers), Google’s Android was able to take advantage of the essentially free access Linux offers, while at the same time retaining rights to the Android software itself, generating  income from compatibility certification and licensing fees.

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.