Following Microsoft’s acquisitions and “partnership,” palm greasing is getting more exciting by the hour. 

The headlines have been coming fast since the end of Q3 11: $8.5b Skype acquisition. $250m quarterly infusion to Nokia. $24m in subsidies for Windows Mobile app developers. $1b Aol patent grab – now flipped to Facebook for $500m. Vague, behind the scenes dealing with Comcast. And now this: a $300m investment in Barnes & Nobles’ Nook division.

Something is up.

It isn’t hard to figure out why Microsoft is moving like a steely-eyed aristocrat on the eve of a revolution: the company failed miserably with it’s own tablets, music players, and phones, and if it doesn't get their OS on the next generation of digital devices, it will not be on the next generation of digital devices.

This lockout is already beginning to happen. Microsoft's mobile OS marketplace penetration in the US is a meager 3.9%. The Nokia deal was made to prevent total hardware manufacturer abandonment of Windows Mobile. The Nook deal guarantees a place for Microsoft in the next round of tablets – but will it matter? Is there a larger strategy being executed here? Can all these different pieces be integrated? 

My guess is – and remains – “no.” Many of Microsoft’s partners are second-stringers for a reason: lack of innovation, and weak positioning. Microsoft's other friends are the carriers, cable companies, and big content studios that are conspiring to set the clock back to some imagined pre-millennial glory days. While it’s entirely possible that all the old powers aligned against Apple and Google can upset the present orbits, the marketplace is currently being driven by more innovative players – and will continue to be so.

Disruption can come from anywhere, and Microsoft is struggling to position itself successfully in a world that is already moving into the past. Speculators have suggested for years that both Apple and Google will square off against wireless carriers. The software-product startup tide is high in the US and will remain so into the near future – and its effects on hardware are unpredictable. (For example, few would have predicated that Kickstarter could emerge as a radical alternative to traditional financing for device designers). There are also enormous electronics manufacturers with skunk works in Korea, China, and Japan whose success is very much in the interest of their respective governments.

Microsoft is paying to stay in the running, but the compromises the company will likely need to make in order to get all of it's partners on board could mean the preclusion of vibrancy and originality. Even younger, hipper companies make this mistake: last week the New York Times television critic Mike Hale said of YouTube's new, original channels that "the harder they try to resemble television, the less interesting they are." 

Brilliant anarchy - the kind that gives both nation states and corporate giants alike the chills. It's the beating heart of 4chan and reddit meme-culture, and is what Gawker has cleverly aimed at capturing with it's redesigned comments section.

Is somebody, somewhere, at Microsoft aware of all these problems? Undoubtably. But that doesn't mean they'll be able to respond to the upcoming challenges effectively. The market is changing, and their hand is being forced.


Published 2 May, 2012 by Sam Dwyer

Sam Dwyer is an Analyst based in Econsultancy's New York office. He can be followed on Twitter @sammydwyer.

24 more posts from this author

You might be interested in

Comments (2)

Jeremy Spiller

Jeremy Spiller, MD at Econsultancy Guest Access TRAININGSmall Business Multi-user

Just read that Barnes and Noble story in another couple of sources as well and therein is an intriguing future for us all.

Barnes and Noble have probably been fairly cross about Amazon's moves towards entering the "very big" league and it's "now we want the world" approach so have themselves teamed up with a very big player.

Of course Microsoft are also interested in a chunk of the Kindle area of the market. Smart move if you ask me, ie if you can't build it, just buy it. And if you don't want to buy it, partner with someone who has it already.

Ref Microsoft while their products are not as "in yer face" as some of Apple's and Google's at the moment they do have Xbox (on which as you say they have a fairly chunky group of content partners such as Sky, a group of major TV channels, film, TV and game people, LoveFilm and Netflix so not shabby) and Kinect (also not shabby) as well as a popular and embedded OS with a new version on the horizon as well as strong business products.

Innovation is certainly an area that I expect Microsoft are looking at carefully but probably not in the same ways that Apple and Google are. All the big players are multi-faceted business models so compete on multiple fronts.

The battles for mobile and the converged entertainment sectors are going to be huge as well as content ownership and partnership.

I think that the Barnes and Noble partnership is another content play, to support the imminent launch of more Windows tablets. These tablets will be various as they'll be launched by Microsoft's hardware partners and some I'm sure will properly compete with the iOS and Android tablets already out there.

We'll see the likes of Dell, Samsung, Lenovo and so on launching multiple products aimed at multiple market sectors with new and innovative features, no doubt.

Second or third to market is not necessarily a bad place to be. Backing this up with embedded content partners (those above as well as Barnes and Noble and many more) will support this as well so my expectation is that very soon, tablet choice will be much greater and the whole tablet and hybrid market is going to open up considerably wider than it has already.

And in less than two years you'll barely see a single laptop on the train, or in meetings, conferences and so on and many will consider it old tech, if they don't already.

over 6 years ago


Sam Dwyer, Analyst at Econsultancy

Thanks Jeremy -- good thoughts.

To your final point, about laptops -- yes. My "guess" is that in a few years you will only carry around your mobile phone, which will wirelessly integrate with various-sized screens/purpose-built peripherals at various stations: desk, livingroom, etc. Much like how many modern cars can be turned on by simply having the fob in your pocket.

Here's some big news from today:

Microsoft selling Xbox 360 for $100, with a contract for $15/month Live service.

This will place the console on a cost par with Apple's machine; Xbox already has a huge start. However, a majority of Xbox users never connect the device to the Live service.

I'm writing an article about how Bing has been redesigned to be cleaner than Google now:

(That's too funny).

Also, there's news today that Amazon is getting into the "tv" content production game as well.

It's an exciting time to be tracking the biz. Keeping on top of the news is like whack-a-mole.

over 6 years ago

Save or Cancel

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Digital Pulse newsletter. You will receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.