Microsoft: From leader to laggard

That once great American monolith, Microsoft, is looking more each year like a corporation living off its former reputation for innovation and growth. The Redmond, Washington, software icon keeps stumbling while its competitors lap the slow-footed corporate Gulliver.

This is a business colossus that regularly racked up average revenue growth of 36 percent through the 1990's as it dominated the manufacturing and licensing of computing software. Those days have faded along with the its market share. In its latest fiscal year, Microsoft struggled to increase revenues by a single digit, delivering only eight percent growth.

While Microsoft rebounded last year with Windows 7, not much else has gone right for the firm. It has found it nearly impossible to stretch beyond its legacy business to take advantage of the growth in the Internet and related web services.

As just one example, the firm's search engine Bing has chalked up $560 million in losses, despite its marketing agreement with Yahoo. Their deal was supposed to boost both firm's fortunes in the battle with Goggle. However, the 10-year agreement seems to be sapping the company's energy and its cash horde.

In its latest quarterly earnings report, Microsoft highlighted its sole product winner outside its software: Xbox games and subscriptions. That division posted a 55 percent revenue gain.

Other departments in the company did not fare as well, including the golden goose, Windows operating systems. Revenues were down 30 percent. That should sound alarm bells for shareholders, although the company tried to tamp down disappointment by pawning off the poor results on an adjustment for Windows 7 upgrade coupons. Whatever.

Microsoft missed the music boom with Zune, which was trounced by Apple's Ipod. While Apple boldly pushed into mobile phones and operating systems, Microsoft couldn't make up its mind how to enter the market. In today's sizzling tablet computer segment, Microsoft has no entry and no prospects. What makes this so damning is the company was first to market a tablet PC in 2001, yet bungled the features, design and marketing.

In the Internet browser wars, Microsoft is the current market leader with its Explorer, but its share has been slowly eroded over the years. Mozilla's Firefox is in second place and gaining ground. Goggle's Chrome and Apple's Safari are threatening to become bigger players. Microsoft's lead is in jeopardy.

Of course, Microsoft's mother of all failures was its much ballyhooed Vista product. Hailed as a breakthrough operating system, Vista bombed in the market. The poorly conceived system was a glitch nightmare that was delivered three years late. After a lukewarm market reception, Vista morphed into Windows 7.

Failure hasn't stopped Microsoft from chasing markets in hopes of catching up with the competition. With much fanfare, Microsoft recently signaled that it has set its sights on becoming the premier developer of apps for smartphones. The giggles on Wall Street surely could be heard all the way in Redmond.

Apple currently has a stranglehold on the app market with a 82.7 percent global share. Research In Motion (RIM) is a distant second with 7.7 percent share. Microsoft's market share doesn't even rise to a single percentage point.

With CEO Steve Ballmer steering the Microsoft ship, this has become an all too familiar theme. The bigger the promise the larger the disappointment. Under Ballmer, uneven execution, marketing malaise and lack of innovation have tarnished its reputation.

Microsoft is a once great company that has mortgaged its future with one costly blunder after another. Perhaps, as Apple did, it is time for Microsoft to recall its founder to restore its lustre. Now that he is no longer the world's richest man, Bill Gates might find drawing a chief executive's paycheck will help both he and Microsoft regain their No. 1 status.