Is Microsoft the Next AOL?

Google’s (GOOG) announcement last weekend that it plans to launch its own open-source smartphone really sent shockwaves through the tech sector. The handset would be compatible with any carrier and be the first big-name product launched without an exclusive deal between the service provider and the phone maker.

This certainly has big implications for the telecom industry, but Google’s open-source move is sending shivers down the spine of one of the biggest tech names in the world: namely, Microsoft (MSFT).

You see, MSFT has had a virtual monopoly on PC operating systems since the first incarnation of Windows back in 1985. As the digital age dawned, Microsoft led the charge — and grew from a start-up in Bill Gate’s garage to the second-largest company in the world behind only Exxon Mobil (XOM). Computers became necessities in the home and the office, and business boomed.

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But we are in the middle of another big tech revolution — the wireless revolution. And just like PCs made typewriters obsolete, the next generation of wireless devices is pushing desktop computers, land-line telephones, CD players and a host of other technologies into history’s dustbin.

And in my opinion, it’s only a matter of time before Microsoft’s landmark Windows operating system becomes the next victim trampled by the endless march of technological progress. Just as the once powerful America Online (AOL) crashed and burned as dial-up Internet became a thing of the past, so will MSFT start a long and steady decline as Windows becomes obsolete.

Smartphone companies have blazed an impressive trail in their latest round of high-tech offerings, providing speedier processors and more attention to the user experience to give premium handsets the almost the same functionality as laptop computers. For instance, I have an iPhone from Apple (AAPL) and use the device for checking email and surfing the web. I can also listen to my favorite music, use the device as GPS for directions — oh yeah, and make phone calls. The gadget does it all.

In fact, what does your laptop or desktop PC do right now that one of these smartphones can’t? If you could plug a bigger monitor or keyboard into your phone, would you even bother to own a computer?

Now you see the threat to Microsoft. Owning a PC with a Windows operating system could become the equivalent of owning a VCR — some people may hold on to it because its familiar, but it’s functionally obsolete. 

This movement was already under way, but the move by Google hastens the demise of the desktop PC. That’s because previously, due to exclusive agreements between manufacturers and service providers, it used to be an “either or” game with smartphones — either to go with Apple’s bells and whistles with the iPhone or to go with Verizon (VZ) for the Droid, either to place a priority on one company’s network or another manufacturer’s hardware. But Google has changed the game. When its new open-source handset hits the market, it will allow users to pick from any applications they can find and choose any service carrier they want. This will foster innovation and allow anyone with a sharp mind and a good idea to discover new and more efficient uses for smartphone handsets.

Personally, I can’t wait until I don’t have to lug my laptop through security at the airport and can fit everything I need right in my pocket. But it’s strange when I stop to think about the fact that over 30 years ago, I was running my first stock selection models on a bulky “supercomputer” at Cal State that took up almost the entire classroom.

Technology sure moves fast. That’s a great thing for consumers — but could spell the end of a very profitable era at Microsoft.

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