Approximately 90% of the time a company's annual report is enough to turn me into a zombie who will only be satiated by brains and/or chocolate. Microsoft's lawyers apparently know this fact and decided to make things interesting this year. The 2011 annual report was far more interesting than expected, discussing how Microsoft viewed Linux as well as who they view as their top competitors.
These annual reports are filed by Microsoft with the Securities and Exchange Commission and as such are published for all to see. Pulling some of the actual text from the 2011 report and comparing it against the 2010 report gives some startling insight into Microsoft's thoughts on their competition. The 2011 report details,
"The Windows operating system faces competition from various commercial software products offered by well-established companies, mainly Apple and Google. The Windows operating system also faces competition from alternative platforms and devices that may reduce demand for PCs. User and usage volumes on mobile devices are increasing worldwide relative to the PC. We believe Windows competes effectively by giving customers choice, flexibility, security, a familiar and easy-to-use interface, compatibility with a broad range of hardware and software applications, and the largest support network for any operating system."
That little paragraph tucked away in a huge 10-K report details quite a bit of information. In last year's 2010 10-K report, Microsoft called out Apple, Google and the Linux operating system as competitors. In 2011, Linux is no longer considered a threat.
Microsoft's biggest competitors now are Apple and Google and this is not just in the Desktop market. In fact, this year's report clearly calls out the fact that other devices are encroaching on the Desktop PC market. Tablets and mobile phones are eating away at the traditional PC business, as are other Internet enabled consumer devices. How Windows 8 performs on these types of devices and what kinds of sales Microsoft can generate in that space is going to be a measure of success for them. Microsoft clearly wants to go after Apple and Google in the tablet and mobile space because, lets face it, most PC users are running Windows already.
There are a few smaller things here worth noting that are buried further in the competition section. First, Microsoft did not use the word security as a Windows strength in 2010. In fact, the company's buzz words have always included innovation, which is missing in this new report. Additionally, it appears from this that Microsoft is feeling pressure in the hardware arena as well, "Our PC hardware products face competition from computer and other hardware manufacturers, many of which are also current or potential partners."
Microsoft's stratagy going forward will be worth watching, especially in regards to the statements outlined in the 2011 10-K report. What has been expressed in this document is likely driving how they are trying to position Windows 8, its release date, and what tablets, phones & other devices it will be promoted on out of the gate.
