A few days ago Apple surpassed Microsoft in terms of market capitalisation by a few billion dollars. To some this signalled the decline in the software giant and the beginning of the end. Obviously this was drawn up by Apple fan boys and people do not understand the talent, resources and innovations lurking in with the Redmond Giant. People sometimes poke fun at Microsoft describing it as a lumbering giant. This is truly an understatement. Microsoft is the company that Bill Gates turned on a dime in 24-hours. This is the company who can come late to the party and take it over. Look at Internet Explorer, Microsoft arrived late and with a few years of hard work and investment it gained 90% of the market and shaped the way the web evolved.

Consumer devices

One thing has become clear over the last decade, Microsoft can’t do consumer devices like Apple, but it is not a consumer devices company. The Zune is a great product but it was marketed badly and Microsoft did not invest in it. Whilst Microsoft has not been very successful in the tablet space it has really some great work with speech recognition, handwriting and work with the pen. If you look at Windows 7 Microsoft has done a reasonable job at making it touch friendly. One area where Microsoft has shined in the consumer space has been is with the Xbox. Microsoft has got it’s foot in the door and in a few years it could dominate this space with the next Xbox and project Natal. What Apple people forget is how Microsoft can swallow and devour anything and once it’s foot is in the door that’s it total domination. Microsoft lost billions in Xbox but has managed to turn it into a profitable force in the gaming world. With the launch of Natal and another Xbox in the pipeline Microsoft could become master of the console world, relegate Nintendo to the history books and force Sony out of the industry together.

Whilst Microsoft’s attempts to conquer the mobile space have been nothing short of pathetic over the last few years Windows Phone 7 looks like it will be a great product and according to some market analysts should be able to gain a significant percentage of the market. First of all it leverages a lot of Microsoft technology and brings a lot of great products together, from Silverlight to Bing, Office and Xbox all in one beautiful seamless experience. Lets think about the mobile market in terms of cars. Oil companies are a lot bigger than the car companies. Why? This is because oil companies supply their product to people day after day after day where as car companies only make a sale every 2-3 years. If Microsoft can get Windows Phones on a lot of handsets it is the equivalent of being able to fuel cars regardless of their make or model. Unlike Apple’s lets keep it all on the iPhone approach Microsoft will be able to put their OS on competing handsets meaning that regardless of what handset wins, as long as it runs their OS they will profit. Oil can be used to fuel planes, ships cars and all kinds of other things. This is the same WP7. Microsoft can get it to run on tablets, kiosks and all kinds of other devices. Not to mention the fact that Microsoft dominates devices. What Apple fans do not know is how Microsoft is everywhere and it has penetrated into every industry and type of consumer electronic product in the world. Windows CE Embedded is an amazing piece of technology that powers everything from GPS systems, hospital equipment, digital photo frames, meat slicers, thin clients and ATMs to mobile phones.

The web and the cloud

Whilst Microsoft has tried to dominate the web their attempts have so far not been wildly successful. Live Search was a bad move by Microsoft and it cost them important market share. Bing is now starting to gain traction and momentum and there is no sign of it slowing. Once again it would appear that Microsoft has it’s foot in the door and has enough resources to compete with Google. Whilst technological and cash resources are important in the online war with Google partners are equally as important. Microsoft has 2 very powerful and important partnerships. One is a search deal with Yahoo! that will give it an extra 15-20% market share but more importantly all of the data that comes with that. Another very if not more important partnership is with social powerhouse Facebook. This is important to Microsoft as it is a technology partner instead of simply being an investment for Microsoft. It gives Microsoft an opportunity to get first dibs on technology. Take for example Docs.com that utilised the latest Facebook and Microsoft technology before it had been announced. This product is great to use and is certainly more powerful than Google Docs. For once Microsoft wasn’t late to the party. A more important deal with Facebook could be integrating Bing into Facebook. This would expose Bing to a greater audience and make more people aware of Bing.

Another very important industry has started to emerge and that it is cloud-computing. Whilst this is an emerging industry Microsoft is betting the whole company on the cloud and is doing a great job at fending off competition from Google, IBM and Amazon. Cloud-computing could be worth $100 billion annually which is roughly double Microsoft’s current revenues. This is where Microsoft is most likely to grow and overtake Apple once again and accelerate way beyond it. If Microsoft can capture 75% of this market industry the world will be Microsoft’s oyster and it will be able to add $75 billion to it’s cash cow businesses. Microsoft already has some great cloud products such as Windows Azure which I think could be  a great success. In my opinion this is one area of the tech world that Apple has overlooked and neglected. Apple hasn’t even set foot in this industry and they and their OS could be left behind. Microsoft’s best bet is in the cloud and it needs to move quickly while it’s competitors are napping or moving very slowly.

The cash cows, Office and Windows

There is no doubt that these two products drive Microsoft and have done for the last two decades and will for a good few years yet. Microsoft is evolving these products, especially Office that will have a very long lifeline. In terms of how far you can pioneer the OS Microsoft has gone nearly as far as you can go. In Office there aren’t many features to be added but there are a number of problems with collaboration and workflow. As Microsoft slowly merges Office and SharePoint together it is getting ever closer to a hybrid product that will be able to fend of other productivity and collaboration suites. Windows will go into decline but we must remember that computers will need a traditional operating system and Microsoft will make money from Windows for a good few decades to come. Microsoft has a very successful server and tools business that will drive the cloud. As long as Microsoft is a major tech player Microsoft will still be able to rake in billions in revenue and profits from this division.

All in all Microsoft has a clear vision, the products, the people and the resources to take it to places way beyond the reach of Apple and Google and make it’s self the rightful powerhouse of the technology world. Whilst Windows and Office are churning away bringing in the cash for Microsoft it has begun it’s transformation into a company that will become far less dependant on Windows and Office but on new technologies and devices that will keep Microsoft relevant and at the forefront of technology for the next few decades.