10 Reasons Why Microsoft's Decline Is Good for the Company

 
 
By Don Reisinger  |  Posted 2010-05-27
 
 
 

10 Reasons Why Microsoft's Decline Is Good for the Company


Microsoft is no longer the most valuable technology company in the industry. Earlier this week, Microsoft's market capitalization fell below Apple's for the first time. Currently, Microsoft's market cap sits at $219 billion. It was at more than $500 billion before Steve Ballmer took over at Microsoft in 2000. Meanwhile, Apple's market cap has grown rapidly. The company's market cap currently sits at $222 billion.

To some, including Ballmer, that might not mean much. Market capitalization changes all the time, and it's entirely possible that Microsoft will regain its standing as the industry's most valuable company within days. But it highlights a major issue: Microsoft is on the decline. And until Microsoft starts accepting that, things might only get worse.

But perhaps there is a silver lining to the news of Microsoft's declining fortunes. Call it a wake-up call or a swift kick. Either way, it's an opportunity for the software giant to evaluate what's really happening in its operation and, based on that knowledge, capitalize to better its operation. Believe it or not, Microsoft's decline is actually good for the company. Here's why:

1. The pressure is off

When Microsoft was the industry's biggest company, it faced unprecedented pressure. The company was looked at as the firm that would bully all others. It also had a target on its back that no other company in the space had. All the while, investors wanted to ensure that the company they owned was staying atop the industry. It was stressful and it caused Microsoft to make some suspect moves simply because it wanted to maintain its standing in the market. But now that's over. And Microsoft needs to embrace that.

2. It's a wake-up call

At the same time, it's a good wake-up call for Microsoft. It was making poor decisions that negatively affected its business. At the same time, Apple, Google and other top competitors were finding new ways to attract consumers. By losing the top position in the industry, Microsoft might have finally gotten the wake-up call it needed. The company can no longer rely on software and believe that it will be the leader indefinitely. Since Ballmer took over, the tech business has been changing rapidly. Meanwhile, Microsoft's operation has stayed relatively constant. That can't happen anymore.

3. It makes the company look at Apple

If nothing else, Microsoft's decline makes the software giant evaluate Apple even more than it has in the past. What is Apple doing right? What kind of products is Apple offering that's helping the company grow so rapidly? Is there something that Microsoft can do to stymie Apple's growth and steal market share for itself? These are just some of the many questions that Microsoft should be asking itself right now. Apple is now the industry's most valuable company. And until Microsoft starts accepting that and looks toward Apple for inspiration, things won't get any better for the company.

4. It could help its reputation

One of Microsoft's biggest problems is its reputation. As the industry's biggest tech firm, the company has faced criticism over its size and dominance in the marketplace. In the past, some have called the company a "monopoly." Even Bill Gates got a pie to the face, simply because Microsoft had become what it was. But all that has changed. Microsoft is no longer the industry's most valuable company, and it can't be looked at as the dominant firm that will destroy everything. Microsoft is the underdog now. And it should embrace that.

Some Adversity Will Bring Renewal to Microsoft


 

5. The pressure is now on Apple

One of the greatest benefits to no longer being the top company in the industry is that the pressure is off. But that pressure doesn't just go away. In fact, it's now shifted to Apple, which is forced to carry that torch and lead the industry forward. But it goes beyond that. Apple and Steve Jobs will now face increased scrutiny. It might also be forced to deal with lawmakers and other critics that like picking on the big companies in an industry.

6. Marketing might come in handy

Time and again, Microsoft's competitors have used the company's standing as the biggest company in the industry to look like the underdog and get on the good side of consumers. Now it's Microsoft's turn. The software giant should embrace the fact that it's now less valuable than Apple and use it to its advantage. Commercials and Web ads would be a good start, but a full marketing campaign would be best. The company can make the point that Apple is now the big, brooding company. And consumers should beware. Hey, it worked against Microsoft.

7. Government regulators might go elsewhere

For more than a decade, government regulators have had their sights set firmly on Microsoft. Whether it's Windows or Internet Explorer, they have been able to take issue with just about everything Microsoft offers. But all that might change now that Apple has taken the top spot in the tech industry. They might finally feel that their work is done with Microsoft, and it's time to take some of its competitors down a few notches. That could mean Apple and possibly even Google will face increased pressure from lawmakers. Meanwhile, Microsoft will be able to enjoy regulators ignoring it.

8. It can play the weakling

For once, Microsoft can be the weak company in the tech industry. That's a good thing. For years, companies in the industry that have played the weaker alternative to a major, dominant player have performed relatively well, as long as they have products and cash to maintain their position in the market. For example, Apple has played it up that it's the weak, small alternative to Microsoft. And that strategy has worked wonders, both from a business and a fan-base perspective. But it can't cling to that anymore. Now, it's bigger than Microsoft, and it won't be able to hide it. But Microsoft can be that small firm. And it can capitalize on it. 

9. Innovation is now a necessity

Microsoft's loss of the top spot in the market should make it abundantly clear to the company that it now needs to innovate. Apple has become the industry's most valuable firm because of its willingness and desire to bring products to the market that few other companies in the industry would even attempt to offer. That can't be forgotten in Redmond. If Microsoft wants to regain its standing as the industry's most valuable company, it needs to take a few pages from Apple's book. Innovation is what consumers and even enterprise customers covet. And Microsoft should have learned that lesson by now.

10. It offers a fresh start

Microsoft should be welcoming the fact that it's no longer the most valuable company in the tech industry. Gone are the days when it needs to be the same company for the sake of its investors and its supporters. Today, Microsoft has the chance to start over. It can become the company that it needs to be, rather than the company that it's expected to be. Things aren't working at Microsoft right now. And maybe its decline is exactly what's needed to give the company (and its investors) a jolt.

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