Monday, January 31, 2011

Microsoft's (NASDAQ:MSFT) Nightmare May Have Finally Arrived

The "Cloud" wasn't able to do it, and challengers from the past haven't been able to do it, but the emergence of the hot tablet market may have finally became the disruptor Microsoft (NASDAQ:MSFT) has feared and competitors have hoped for for years.

In their latest quarterly report, Microsoft's Windows dropped in sales and consumers bypassed desktops for smaller devices. That has generated immense concern over the future of Windows and the PC, as Microsoft has a market share of about 90 percent as far as PC operating systems go.

At this time analysts are somewhat mixed on their response to the threat, with some like Bank of America (NYSE:BAC) saying Microsoft will continue to be able to drive growth via refresh and upgrade cycles.

Others like JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) weren't as optimistic, with Wells saying "tablet demand is likely to weigh on consumer Windows sales," and JPMorgan adding, tablets are sure to "hang over Microsoft like a dark cloud."

Even downwardly revised PC unit shipment targets are being considered too optimistic.

It'll take a couple of quarters more to find out if there is a sustainable trend or not, but Microsoft will know far sooner than the rest of us, and the feeling is this is something that could happen quickly and change the computer dynamic forever.

While Microsoft is more than Windows, the impact would be extraordinary on the company, but could, on the positive side, force it out of its comfort zone and move it into more innovative areas.

None of this will happen overnight, but it's very possible, and probably probable, that Microsoft will continue to lose Windows sales incrementally, which could add up significantly in a relatively short time.

This appears to be the greatest threat to Windows they've had in their history, and probably within about six months we'll know how deep and extensive the threat really is.

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