by Shane O'Neill

Microsoft in 2012: The Comeback Kid?

Jan 12, 20124 mins
Computers and PeripheralsMobileOperating Systems

After wowing the public at CES with two killer Windows Phones and impressive Windows 8 demos, is Microsoft primed to prove Steve Jobs wrong and be relevant (or even cool)?

Maybe I’m a little daydreamy from the CES afterglow, but I’m starting to think 2012 will be Microsoft’s year.

Look, it’s not as if Microsoft lacks for money ($70 billion in revenue in 2011). Yet the Redmond-based company has been getting its butt kicked over the past decade in emerging markets as Apple, Google and Amazon became mobile and cloud computing innovators. If there was any year for Microsoft to break out of its “profitable but boring” pigeon hole, this is it.

A good first step was the company’s big mobile splash at this year’s Consumer Electronics Show. Steve Ballmer’s last CES keynote may not have told us anything new about Windows Phone, Windows 8 or Kinect, but the two Windows Phones launched at the event (HTC Titan II and the Nokia Lumia 900, both designed to run on AT&T’s next-generation LTE network) received accolades and were huge momentum builders.

Certainly when the CES noise dies down, Microsoft will go back to a cold reality where Windows Phone has miniscule market share and is ignored by consumers. Windows Phone accounted for less than 2 percent of the worldwide smartphone market for the third quarter of 2011, according to research firm Gartner.

But the buzz around the Nokia and HTC Windows Phones was a turning point for Microsoft’s aggressive but unfocused smartphone play. With Nokia’s Lumia line we finally have sexy hardware on Windows Phones from a company that is pulling out all the stops to restore its past glory. Other hardware makers like Samsung and HTC are not as beholden to the Windows Phone OS because they also run market leader Android. But if Windows Phone does catch on with consumers, Microsoft will have a strong supply to meet the demand.

In addition to Windows Phone momentum, Microsoft is going strong with Xbox Kinect to commandeer the living room and is prepping Windows 8 for a public beta release in late February. Ultrabooks, super thin and light laptops, were everywhere at CES and represent an opportunity for Intel and Microsoft to curb the tablet frenzy and keep diminishing PC sales from falling through the bottom.

With a bold new Metro user interface, Windows 8 is designed to work as a desktop OS and with multi-touch functionality on a tablet. The desktop story is not as compelling because there is no pent-up demand from consumers or businesses to replace Windows 7. But the tablet is different. It’s essential that Microsoft release a Windows 8 tablet that excites consumers and businesses and makes Apple work a little harder for all that iPad cabbage. This is a huge challenge, but Microsoft has the money and determination to meet it.

But is Microsoft arriving too late? This is a common criticism, but I would argue that “late” doesn’t matter as much anymore. Markets, especially a flexible, fly-by-night market like mobile, will be willing to give Microsoft a chance. Slate tech columnist Farhad Manjoo argues that it’s common these days for tech products to suddenly thrive after floundering for years.

“In general, ‘too late’ isn’t much of a problem in the tech business anymore, because the Internet has allowed both customers and developers to move between platforms without much hassle,” Manjoo writes.

“That’s why the Mac OS is seeing a resurgence after years of being pummeled by Windows, why Gmail and the Chrome Web browser succeeded even though they were years behind their competitors, and why Android now commands nearly half of the smartphone market.”

Another shift in the making is CEO Steve Ballmer’s image. Big Steve graces the cover of this week’s issue of Bloomberg Businessweek with the headline “No More Mr. Monkey Boy”, referring to Ballmer’s infamous on-stage dance at a tech event 10 years ago. For that and for many other displays of excessive enthusiasm, Ballmer has been labeled a buffoon at times. But in 2012, the Businessweek article states, he and Microsoft will undergo a game-changing reboot with high profits and cool new products leading the way.

What do you think? Is 2012 the year of Microsoft 2.0 or will the big ship just keep chugging along profitably?