Friday, February 13, 2009

Microsoft's planned foray into retail - why??

Microsoft has announced plans to open retail locations in the US. According to the news story, "With the retail strategy, Microsoft said it hopes to articulate and demonstrate its innovation and value proposition." (source: Microsoft Plans Stores) In doing this, I suspect that Microsoft is looking for something ... anything ... to steal some buzz from Apple. December saw Apple approach 10% of personal computer sales while Microsoft Windows' market share by a full percentage point for the second consecutive month.

In the grand scheme of things, I don't see this as being as big a deal as some the trade press is making it out to be. Plus, I wouldn't be surprised to see the main-stream press pick up on the story as though it's some grand shift in the PC landscape.

  • First of all, Windows will continue to decline in market share, and these stores won't change that. Businesses are not replacing PC's as quickly, for entirely predictable financial reasons.
  • Secondly, Vista has been, and continues to be, a nightmare for the company. The result is that corporate buyers are either waiting for Windows 7, or starting to explore the alternatives. At least some of those who explore alternatives won't come back.
  • Finally, at the end of the day, Microsoft does not sell computers. They sell a few devices, like the Zune and the XBox, but that's not enough of a product line to make a retail store a destination. If anything, the Apple stores will look even more exciting and more compelling by comparison.

In the end, I predict that this will be a "phase" Microsoft goes through. It will last 5 or 6 years and then quietly fade from view.

Microsoft Corporation: MSFT (NASDAQ)
Apple, Inc.: AAPL (NASDAQ)

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