Once again, Redmond-based Microsoft Corporation (NASDAQ:MSFT) has successfully demonstrated how to ruin a great product and an otherwise stable source of revenue by broader plans that are not in sync with the real world. And that gives a fresh start to Sony Corporation (ADR) (NYSE:SNE), a company that’s been down in the dumps for quite some time now and has actually been the target of an activist investor in recent weeks.
At the recent E3 in Los Angeles, the hallowed destination of hard core gamers, who themselves are a fast-disappearing species by the way, Microsoft Corporation (NASDAQ:MSFT) and Sony made back-to-back rival game console offerings in the forms of the Xbox One and the Playstation 4, respectively. But while the latest avatar of Microsoft’s popular game console was clearly aimed at a more holistic family entertainment scenario, the Sony Corporation (ADR) (NYSE:SNE) Playstation 4 highlighted just the fact that such a device was meant for – gaming. And the latter strategy paid off handsomely, at least in the initial phase.
The puzzling decisions
That apart, Microsoft Corporation (NASDAQ:MSFT) also seemed to have committed marketing hara-kiri by announcing restrictions on playing used games on the device, not to mention pricing it a good $100 more than its rival console. And the fancy Kinect motion sensor accessory does little to justify the enhanced price tag, in the opinion of some gaming enthusiasts. The Sony Corporation (ADR) (NYSE:SNE) Playstation 4 also does not require periodic Internet connectivity, another fact that has helped it to go one up on Microsoft’s gaming device.
The broad scenario
The crux of the matter, however, still lies in Microsoft Corporation (NASDAQ:MSFT)’s ambitions of transforming what is otherwise a great purely gaming device into a jack-of-all-trades, with features such as Skype and live television representing different aspects of all-round home entertainment. That again is part of its larger policy to arrest the increasing trend of gamers shifting their loyalties to smartphones and tablets, as people prefer to multitask in an increasingly mobile world. But, what Microsoft has perhaps failed to realize is that this approach may in the process lead to the steady alienation of its loyal group of hardcore gamers, painstakingly built up over a span of 7 years with devices such as the hugely popular Xbox 360.
The ‘dissatisfied others’
And it’s not only gamers we are talking about here. Microsoft Corporation (NASDAQ:MSFT)’s seemingly ‘excessive’ restrictions on the Xbox One usage are sure to alienate retailers such as GameStop Corp. (NYSE:GME) as well. This is because a large part of their sales volume can be attributed to the market for used video games, which Microsoft seems hell bent on shutting out of its ecosystem. With GameStop already facing headwinds due to the dwindling market for console video games, such moves will surely not go down well with them. At the same time, companies such as GameStop will now be grateful to console manufacturers like Sony Corporation (ADR) (NYSE:SNE) that have placed zero restrictions on used games.
Look who’s calling
Having said all that, all is not lost for potential believers in the stock. Microsoft Corporation (NASDAQ:MSFT)’s Windows 8-powered Lumia range of smartphones that are manufactured by Finnish handset maker Nokia Corporation (ADR) (NYSE:NOK), is witnessing a steady rise in market share in the crucial US region. Although the competition in the form of Google Inc (NASDAQ:GOOG)’s Android and Apple Inc. (NASDAQ:AAPL)’s iOS operating systems continue to be way ahead, a recent survey has found Microsoft’s Windows phone platform record a healthy 5.6% rise in sales as compared to an increase of 3.8% last year. What’s more, that places the Windows phone operating system at third place, bypassing nearest contender Research In Motion Ltd (NASDAQ:BBRY). And going ahead, sales are bound to rise given the wide range of prices of Windows-based smartphones.
A walk in the clouds
That brings us to the last part of the trilogy – namely Microsoft Corporation (NASDAQ:MSFT)’s famed Office software suite. Or should we say Office 365, to be more specific, referring to the cloud-based version of the software suite? With Microsoft Office continuing to be the corporate customer’s favorite set of office applications, Office 365 is making strong inroads into a market that comprises many companies that need to comply with regulatory obligations such as HIPAA, thereby placing it several notches ahead of its most serious contender in this area – Google Apps.
The fact that Android has a perceived high susceptibility to malware has exactly not helped Google forge far ahead in the enterprise space as of now, leaving open several opportunities for Microsoft Corporation (NASDAQ:MSFT). That apart, Microsoft has already earned brownie points with proven advantages over Google Apps such as better offline access and onsite flexibility with Office 365. At the same time, the real success of Office 365 will obviously be a part of Microsoft’s overall Windows 8 experience, which has till now been a letdown, to say the least. One can only hope Windows Blue comes to the rescue at the nick of time, before the Windows 8 launch resembles a potential Vista-like situation.
Some final thoughts
As usual, Redmond continues to emit mixed signals as of now, but the bright spots are slowly becoming bigger and brighter. At the same time, things like a better array of apps for the Windows 8 phone marketplace will really help Microsoft Corporation (NASDAQ:MSFT) build up on its strong competitive advantages. However, numerous instances such as missing out on the smartphone revolution at the time when it happened or the ill-conceived launch of Windows 8 have comprehensively proved that the company may have a serious problem in gauging the pulse of the people. And that’s something which simply paves the way for disaster in the long run. While I do not recommend selling the company’s shares as of now, this is definitely not the time to acquire any new ones.
Subhadeep Ghose has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft.
The article Microsoft: Why You Still Can’t Afford to Rest Easy originally appeared on Fool.com.
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