Microsoft’s future is uncertain

Microsoft is falling behind in its war against Google, even though it is ahead in terms of market cap. Microsoft’s market cap, as of Thursday (10th December), is a little more than $ 265 Billion whereas Google is around 187 Billion, IBM at 169 and Apple at 176.

Looking at Microsoft’s yearly financial reports, they have reported their revenues/costs with respect to 5 Operating Segments. A look at these segments is interesting –

Microsoft had to resort, earlier this year, to widespread layoffs and announced its worst quarterly revenue earnings ever. They have created a new division to focus on Cloud but it seems to be a bit too late in the scene. No wonder, analysts say that but for their gaming, the war is over for Microsoft.

Now, where does Microsoft go? Services industry – one that has a lot of potential and a continuous stream of revenue that their big rival Google is still lacking. Microsoft plans to buy healthcare software maker Sentillion to expand its own healthcare offerings and capitalize on an upcoming opportunity for new sales. Where does it fit into the above segments is unknown.

Where it does fit is the $22 billion healthcare modernization bill that has been approved by Obama.  Very similar to the acquisition of Perot Systems by DELL (Perot Systems is well known for its expertise on healthcare solutions). This might be their new segment called ‘Services’ – I predict that an offshore acquisition will be next by Microsoft so that they can setup a full-fledged Business Center to support the new healthcare vertical.

Overall, the Xbox, Office Suite, Windows client/server, .Net framework seem to be pulling the company ahead. How long will it take for the likes of SONY, Google, Linux, Java to overtake them in the corresponding areas remains to be seen. Hence, Microsoft is getting into the services business to be a step ahead of Google. What will be Google’s retort?

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