Most investors recognize Microsoft (NASDAQ: MSFT) as the company that dominates PCs with the Windows operating system, owns the productivity software market with Office, ranks second in the cloud platform race with Azure, and sells the Xbox One, the second best-selling gaming console in the world. Analysts believe those growth engines will boost Microsoft’s revenues by 10% this year and 8% next year.
But on its way to becoming one of the world’s biggest tech companies, Microsoft missed out on many lucrative markets. Here are six of its biggest lost opportunities.
Image source: Microsoft.
When Apple (NASDAQ: AAPL) launched the first iPod in 2001, the MP3 market mostly consisted of low-capacity devices that stored about a dozen songs. Yet the first iPod’s 5GB drive was roomy enough for over “1,000 songs”, and it turned iTunes into the first major digital music distribution platform.
Microsoft didn’t enter the market until it launched the Zune in 2006. But the following year, Apple launched its first iPhone, and integrated iPod features and iTunes into its new smartphone. Meanwhile, Microsoft didn’t support the Zune with adequate marketing, and the product line was finally discontinued in 2010.
When Apple introduced the first iPhone in 2007, former Microsoft CEO Steve Ballmer famously declared: “There’s no chance that the iPhone is going to get any significant market share.” Microsoft then stood by as Alphabet ‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google launched Android, a free operating system for mobile devices, the following year.
Microsoft didn’t release its first multi-touch mobile OS, Windows Phone 7, until 2010. By then, the mobile OS market was firmly split between iOS and Android, and developers shunned Windows Phones. Microsoft tried propping up the business by buying Nokia ‘s handset unit in 2014, but that desperate move resulted in a multi-billion dollar writedown. Last October, Microsoft admitted that Windows Phone was dead, and that it wouldn’t develop any new features for Windows 10 Mobile.
Without a foothold in mobile devices, Microsoft failed to follow Apple and Google into the connected car market. To project their mobile displays onto dashboards, Apple released CarPlay and Google introduced Android Auto. In 2014, Microsoft showcased its own mobile mirroring system, ” Windows in the Car ,” but the concept never became a reality.
Image source: Getty Images.
Microsoft also lost the embedded automotive OS market to BlackBerry ‘s (NYSE: BB) QNX. Over the past few years, Microsoft’s OS for cars, Windows Embedded Automotive, was marginalized by QNX, which controls nearly half the automotive market, and Linux, which controls about 20%.
Those missteps could cause Microsoft to miss out on the shift toward connected cars as the next major computing platform.
Microsoft entered the wearables market in 2014 with the Microsoft Band. The device, which was compatible with iOS, Android, and Windows Phone devices, was initially well-received in the US and UK. It offered a heart rate tracker, a GPS, a microphone, skin temperature and UV sensors, and an ambient light sensor, making it more advanced than many basic fitness trackers on the market.
Its successor added enhanced Cortana integration, estimated a user’s maximum oxygen capacity, and improved some of the original’s features, but its launch price of $250 was too steep for mainstream consumers. In late 2016, Microsoft discontinued the Band amid intense competition from rival wearables makers.
Microsoft’s Internet Explorer was once the most popular PC web browser in the world. But today Google Chrome holds that title with over 60% of the worldwide market, according to Net Market Share, compared to just 12% for IE and 5% for Microsoft’s newer Edge browser.
Google’s conquest of the web browser market — aided by the dominance of its search engine — greatly increased its access to users’ browsing histories, and improved the quality of its targeted ads. The cross-platform convenience of the desktop and mobile versions of Chrome was also tough for Microsoft, which lacked a reliable mobile OS, to counter.
Lastly, Microsoft responded slowly to the rise of smart speakers like Amazon (NASDAQ: AMZN) Echo and Google Home. Research firm CIRP recently estimated that Echo controlled 69% of the US smart speaker market, while Google Home controlled the remaining 31%. Amazon’s share would likely be even higher if other third-party Alexa-enabled devices were included in its market share.
Harman Kardon’s Cortana-powered Invoke speaker. Image source: Harman Kardon.
Microsoft’s approach to this market has been timid. Instead of launching first-party Cortana-powered devices like Amazon and Google, the company is relying on third-party partners like Samsung ‘s Harman Kardon to release its Windows speakers.
Microsoft hasn’t technically lost this market yet, but that non-committal attitude could doom its efforts as other rivals like Apple’s HomePod enter the market.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Leo Sun owns shares of Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy .
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