The Computer Buzz

January 8th, 2009

Nome and Paul Van Middlesworth - owners - The Computer Factory
 

Bad year for Microsoft

2008 was not kind to Microsoft. Year-end 2008 found Microsoft stock trading at roughly half its 2008 high of $35 per share. While this decline roughly mirrored the decline of the NASDAQ exchange where Microsoft is listed, Microsoft's decline was largely attributable to the failure of its ill-fated operating system "Vista."

Microsoft's share of the operating system and browser market dropped significantly throughout 2008. With business users choosing to stay with the XP operating system and retail sales of Vista PCs slow due to the recession, the percentage of PCs worldwide using Microsoft operating systems fell from 92% to 89% through 2008. While this decline may not seem large. It is very significant when you consider the method used to arrive at these numbers.

The operating system market share percentages are measured by sampling the operating system of all Internet users. The average age of computers using the Internet is about 36 months. A drop in market share of 3% over the course of a year represents a far more dramatic shift in user preferences at the front end.

In the US the changes in operating market share from January through December 2008 were: Vista 5% to 16%, Windows XP 81% to 67%, Windows 2000 4% to 1.5%, Apple Mac X 6.5% to 9.5%. All other operating systems (mainly Linux) grew from 3.5% to 6%.

Significantly, already two years old and only months away from being replaced by Microsoft's upcoming release of Windows 7, Vista holds less than a third of the market share held by its venerable in-house rival, Windows XP. Another interesting fact is that more than ten times as many users have "downgraded" from Vista to XP as have "upgraded" from XP to Vista.

Microsoft's share of the browser market (Windows Internet Explorer) also declined in 2008 dropping from 79% to 68%. Microsoft's loss was picked up by gains from Firefox 15% to 21% and Apple Safari 5% to 8%.

Finally Microsoft's share of the search engine market eroded in 2008 falling from 10% to 8%. Yahoo also suffered a decline from 22% to 20% while Google jumped from 59% to 64% of the US Internet browser market.

Certainly Microsoft still maintains an overwhelming dominance in the operating system and browser segments of the computer industry. The release of Windows 7 later this year and the gradual change to 64 bit operating systems and software will help to firm up Microsoft's dominance in these areas. Windows 7 should be relatively bug free as it will essentially be a stripped down, cleaned up version of Vista.

Microsoft has not yet figured out how to become a major player in the lucrative search engine business. Even if Microsoft does close a deal to buy Yahoo, it is unlikely that they will catch up to Google any time soon.

Microsoft is no longer the lean, mean, innovative machine of the 1980s. Microsoft is the lethargic, slow-witted oaf of the computer industry protected mainly by its ungainly girth and a few hundred crackerjack lawyers.