A $12.5 billion-dollar payout makes for a big bomb, and the fallout from Google‘s (NASDAQ:GOOG) acquisition of Motorola (NYSE:MMI) still is curling its way through the beleaguered market.
The acquisition has analysts discussing tactical impact on Apple (NASDAQ:AAPL) and its arsenal of iPhones and iPads, but investors saw the move as enough of a blow against the Cupertino, Calif.-based company that nearly all of its competitors saw share prices bump up. Nokia (NYSE:NOK), Research in Motion (NASDAQ:RIMM), Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) all got boosts after Monday’s announcement. Nokia even jumped an impressive 17%, with shares slinking back above $6. Wall Street suddenly wondered who has a chance to topple (and who else might partner up to take on) Steve Jobs.
Nokia’s new partner, Microsoft (NASDAQ:MSFT), didn’t see a significant boost, however. It gained only about 50 cents between Monday and Tuesday, well within the range it has been trading in throughout August. Investor indifference toward the stock this week when all eyes are on major players in the mobile and broader computing industries illustrates just how peculiar and precarious Microsoft’s position is in those markets. The question: In a world where Apple and Google are altering the face of consumer computing by driving users away from PCs and toward mobile devices like tablets and smartphones, where does that leave Microsoft? What is Windows’ place in this landscape?
Right now, Windows’ place still is at the top of the heap. Research firm Gartner reported on Aug. 9 that Windows 7, the latest iteration of Microsoft’s era-defining operating system, will own a majority share of its market, running on 42% of all PCs worldwide, by the end of 2011. It will run on 94% of all new PCs sold. Apple and Google aren’t a threat in this arena. Even Mac laptops, which have seen profound sales growth since 2008, will account for only 5% of PCs by 2015. Microsoft’s security in this arena assumes, however, that PCs will remain the dominant machine for computing needs.
Even if PC sales have declined only by about 1% in 2011 so far, consumers especially are trending away from buying new desktop and notebook PCs, putting money instead into compact computing devices like smartphones and Apple’s wunderkind, the iPad. Even businesses won’t necessarily rely on Windows-based PCs since applications will be available on multiple devices. Gartner expects 50% of business applications to be built to run on any operating system by 2012.
Windows 7 likely won’t define Microsoft’s place in the future. That job falls to Windows 8, the next iteration due out next year that will work as both a traditional PC interface and a touch-based mobile operating system presented in an easy-to-swallow app format. It’s a little bit Windows 7, a little bit Windows Phone and a spoonful of Apple’s iOS thrown on top. This is the platform that will fuel not just future PCs but Nokia-made Windows smartphones and tablets from a fleet of manufacturers like Dell and others by the end of 2012.
Microsoft will need that level of platform ubiquity to survive in the modern age. It will need Windows 8 to be versatile enough that it runs on anything, from the highest-end business PC to a refrigerator. The company is showing humility in the leading up to its release as well, addressing consumers burned by past Windows updates like the disastrous Vista, a promising change from the Microsoft of old. With quality manufacturing partners and solid functionality, Windows 8 might help Microsoft maintain its decades-long rule of the computing roost. That is, if it isn’t too late to edge out Google Android and Apple’s big toys.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
