Playing the prediction game is not easy. Just ask the eminent “Silicon Valley guru” who confidently predicted 10 years ago that there were only six quarters left at Microsoft before it began a rapid descent into failure. “Microsoft is an undead. Microsoft is now a permanent joke in the tech industry,” he said in mid-2011.
His advice to the Microsoft board of directors? Your business needs to be more like IBM, he suggested. Buy Nokia, lay off thousands of employees and replace your CEO. In short, Microsoft should “reinvent itself”.
So how did it go ? A decade later, even after a spectacular failure with its takeover of Nokia, Microsoft is the second largest company in the world, with 25 times IBM’s market capitalization. No reinvention required.
The moral of the story is that it’s never smart to think of Redmond as offline and slow. And yet, as we head into 2022, the company faces challenges remarkably similar to those it faced back then, from the same two competitors it was 10 years ago, Apple and Google. .
Can an older, bigger Microsoft use the same magic that has kept it on top for so long?
Apple and the M1 dilemma
Microsoft has competed with Apple on the desktop for decades, and the overall narrative hasn’t changed much during that time. The Mac is preferred by creative professionals, who are willing to pay extra for Apple-branded hardware, while the PC industry sells Windows computers 8-10 times more, mostly for business use.
As long as both hardware platforms were driven by the same Intel-compatible processors, that was a predictable dynamic. But Apple has completely turned the market around and reset with its new Macs, which are powered by new proprietary M1 family processors.
The new M1 Pro and M1 Max SoC designs offer remarkably better performance, especially for graphics-intensive tasks, as well as significantly improved battery life. It’s tempting to look for the easy way out: Microsoft should speed up its migration to Arm-based PCs. After all, Windows 11 now runs a full 64-bit emulator on Arm-based PCs like the Surface Pro X.
But the secret to Apple M1’s success isn’t just the change in architecture. Much of these performance improvements come from the company’s decision to design its M1 chips in-house and tie the operating system and silicon in a way that is not possible with standard components.
Microsoft has an ongoing partnership with Qualcomm which is similar to its long-standing relationship with Intel, but it has nothing to do with Apple’s years of experience in SoC design. Without this deep integration, it’s hard to see how Windows PCs catch up with M1-based Macs. Or, for that matter, how they compete with the growing base of M1-powered iPads, which are increasingly capable of supporting PC-like workloads.
Google and the new browser war
At the turn of the 21st century, Microsoft had an unchallenged monopoly with Internet Explorer. If you wanted to use the web in the early 2000s, you almost certainly did on a PC, using Microsoft’s ubiquitous browser.
This lead began to gradually dissipate as competing browsers entered the market, and the trend accelerated dramatically when Google launched the Chrome browser in 2008. And nothing Microsoft has done in the meantime. ‘made a dent.
Launching the new Microsoft Edge browser with Windows 10 and setting it as default was a good start, but it hasn’t had any luck getting past Chrome’s big lead. Here’s what I found when I checked the browser stats at the end of 2019:
According to the most recent statistics from the US government’s digital analytics program, less than 16% of Windows 10 PC traffic goes through Microsoft Edge, and even Internet Explorer has a higher usage share. This is a significant drop from the 20% share Edge had on Windows 10 PCs in 2017. Meanwhile, Chrome’s usage share on Windows 10 is over 60%.
In January 2020, after a few months of beta testing, Microsoft released a brand new Edge, built on the same open source Chromium code base that Google uses for Chrome. Most importantly, the new Edge is a cross-platform product, designed to take on Chrome on mobile devices, Windows PCs, Macs, and even Linux machines. (For a full timeline of Microsoft’s browser strategy for decades, see “With Chromium-based Edge, Has Microsoft Finally Found a Viable Browser Strategy?”)
Accessories to Microsoft for the effort, but nearly two full years after its release, Microsoft Edge has barely moved the needle, slipping just over 20% in use on Windows 10/11 PCs. Despite these modest gains, it is actually further behind Google Chrome, which has increased its lead over Windows PCs to a staggering 69%.
Meanwhile, the new Edge barely registers on other platforms, slashing a fraction of a 1% share on macOS, iOS, and Android devices.
Microsoft’s response to this lack of adoption has become increasingly desperate. The new version of Windows 11 makes it much more difficult to switch from Edge’s default browser to another alternative, like Chrome. And the latest versions of Edge are chock-full of links to Bing and MSN, including purchasing features and even partnerships with Buy Now Pay Later services, all with the goal of redirecting revenue from Google services to results. Microsoft.
This is a classic example of Good Microsoft versus Bad Microsoft, a battle that has been going on internally in Redmond for as long as I can remember. (See, for example, this sordid story from 2010: “‘The good Microsoft vs. the bad Microsoft on privacy.’)
The irony is that Microsoft is making a lot of money through Office subscriptions on Android and iOS devices. But reaping those profits through the good graces of another platform is always a risky business, and Google, like Microsoft in its worst days, isn’t afraid to throw away.
As longtime Microsoft watchers know from experience, dislodging a well-established competitor is not easy, and sometimes it requires the help of government regulators. And for now, at least, these regulators are targeting someone other than Microsoft, which could give a clue as to where this story ends.