Microsoft's Biggest 2010 Missteps

2010 looked like a picnic in Redmond compared to 2009, but Microsoft still fumbled a few times. It fell asleep at the wheel in the tablet and mobile phone race — and despite some pointed romancing, did not charm Wall Street.

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Mon, December 20, 2010

CIO — Compared to the turbulent 2009 that saw Microsoft's (MSFT) first widespread layoffs and its worst quarterly revenue earnings ever, 2010 was smooth sailing.

But anything short of death would be smooth sailing compared to 2009.

2010 was still a year of highs and lows for the software giant. One of the biggest wins was in gaming with the release of Nintendo Wii competitor Kinect, Microsoft's controller-free motion technology built into Xbox 360 that sold 2.5 million units in its first month. Windows 7 adoption also remained steady, as Windows XP-weary enterprises began buying new PCs and migrating existing ones to Windows 7.

Microsoft search engine Bing continued to build momentum against Google (GOOG) and has grown by nearly 50 percent since its launch a year and a half ago. Microsoft also made a commitment to cloud computing with Windows Azure, a cloud services platform for developers, and the newly rebranded Office 365, which gives businesses access to Office Web apps and cloud versions of Exchange, SharePoint and Lync for a per user, per month fee.

But even with these highlights, Microsoft slipped in some major areas in 2010. It was caught asleep at the wheel with tablet PCs (hello, iPad), got downgraded by Wall Street and re-entered the mobile phone race with a whimper with Windows Phone 7.

"You have to think a little harder for the Microsoft negatives this year," says veteran technology analyst Roger Kay. "But there were still negatives."

Blindside by the Tablet PC Craze

It's ironic that Microsoft has fallen behind in the tablet PC market, because tablets were a Bill Gates vision. But Microsoft didn't see it through, says Kay, and then Apple launched the iPad to grand success (Apple is on schedule to sell 8.5 million iPads this year and more than double that in 2011, says research firm eMarketer).

"With the iPad's immediate popularity, Microsoft had a 'whoops' moment," says Kay. "They had to care about tablets again."

Microsoft CEO Steve Ballmer announced on two different occasions in 2010 that Windows 7 tablets would be available by the end of the year. But as Christmas approaches, there are no serious Windows 7 tablets to be had. The iPad is the only tablet PC on anybody's mind, with a few Android-based tablets like the Samsung Galaxy Pad vying for attention.

"While some tablets running Windows 7 are available from OEMs, you really have to hunt for them, and they are more a convertible laptop/tablet than a pure tablet," says Directions at Microsoft analyst Michael Cherry.

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