Microsoft Corporation (MSFT): Will It Be Obsolete By 2017?

An article on Yahoo! titled Microsoft Could Be Obsolete By 2017: Gartner Report examines the possibility of Microsoft Corporation (NASDAQ:MSFT) becoming irrelevant by 2017. It is an interesting topic–after all, ten years ago, Microsoft Corporation (NASDAQ:MSFT) was so dominant that the idea would not even be worth discussing. Fast forward to the present and the PC industry is stagnant and Microsoft Corporation (NASDAQ:MSFT) is battling for scraps in the rapidly growing mobile device market. Meanwhile, the iPhone and iPad are household names, and Microsoft Corporation (NASDAQ:MSFT)’s rivals Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) are thriving.

Microsoft Corporation (MSFT)

Furthermore, Android’s strong presence in smartphones almost guarantees that Microsoft Corporation (NASDAQ:MSFT) can only be a niche player in that market. Yes, Apple Inc. (NASDAQ:AAPL) is also an obstacle, but Google Inc (NASDAQ:GOOG)’s business model with Android puts Microsoft Corporation (NASDAQ:MSFT) at a big disadvantage. Android is a licensable OS, so it negates Windows Phone OS’ advantage of being licensable. In addition, Android is free and the OS has a huge lead over Windows in the number of apps and market share. Android’s global market share in the fourth quarter for smartphones was 70%. Basically, Microsoft has to overcome factors similar to those that make Windows unstoppable with the added obstacle of Android being free.

The article references a Gartner report that paints a dismal picture for desktop PCs with PC unit shipments continuing to decline and mobile device shipments continuing to surge.

Device Type Unit Shipments (thousands) 2012 2013 2014 2017
PC 341,263 315,229 302,315 271,612
Tablet 116,113 197,202 265,731 467,951
Mobile Phone 1,746,176 1,875,774 1,949,722 2,128,871

Gartner states, “This is not a temporary trend induced by a more austere economic environment; it is a reflection of a long-term change in user behavior.”

Mobile devices are overrated

The projected decline of Microsoft into irrelevance basically hinges on the premise that mobile devices will make/have made the desktop PC obsolete and irrelevant. This is simply not the case. The main advantage of smartphones and tablets over traditional PCs is their portability. Users can easily take their smartphone or tablet outside and access the internet on the go. This has made mobile devices hugely popular.

While this is a great attribute, this does not make the desktop obsolete. On the contrary, modern desktops can use cutting edge processors and the processing power of a desktop completely outclasses a similarly priced mobile device. The hardware on a mobile device is limited by the battery and smaller form factor. This means that the chip or SoC powering the device has to be low powered with no or very little active cooling (e.g. a small fan). This is not the case for desktops so much more powerful processors are used.