In Apple-Google mobile world, is Microsoft just an also-ran? (Feature)

By Andy Goldberg Apr 14, 2010, 2:32 GMT

San Francisco - It's never pretty to see a giant fall, but it always makes for a good story.

As gadget lovers and technology pundits have been obsessing over the last week about the fateful struggle between Google and Apple to control the mobile internet, one name was conspicuous by its absence.

Microsoft, which just a few years ago dominated the most crucial areas of computing, is now considered such an also-ran in the most important area of consumer technology that its name was hardly mentioned in coverage of the great iPhone-Android showdown.

That's a very bad sign for the Seattle software giant, as the world moves from the PC paradigm dominated by Microsoft to the age of the mobile internet, where it seems the largest tech company in the world may be little more than a wannabe.

Though Microsoft is still the most highly valued technology company in terms of market worth, a quick glance in the company's rear-view mirror shows the sleek and sexy silhouettes of Apple and Google fast closing in.

Google has long been seen as a potential rival to Microsoft. But it's only in the last year that it has become abundantly clear what form that challenge would take, as the web search company unveiled its own operating systems for laptops, netbooks and mobile phones.

Underlying these developments is the principle that all the data and programs that users need can reside on Google's servers, where they can be accessed and manipulated by simple machines connecting to 'the cloud.'

Google's market cap of about 182 billion dollars is still almost 100 billion dollars below that of Microsoft. But Apple is fast closing in as investors reacted almost as enthusiastically as traditional Apple fanboys to the launch of the company's iPad tablet computer and the announcement of a new operating system for the iPhone.

The company's stock price, which almost tripled last year, now values Apple at some 220 billion dollars, a mere 45 billion dollars behind Microsoft.

That might seem like a lot of money to most people. But in the trillion-dollar high-tech market, it's a gap that can be quickly closed when investors flock to one company's shares and the other's share price stalls. This is rapidly happening as Google and Apple dominate the mobile internet, which according to Morgan Stanley analyst Mary Meeker will see more users than the PC internet by 2013.

Microsoft seems to have not noticed this trend, according to tech consultant Andrew Hartung.

'Microsoft chose to invest in defending and extending its PC software business as the market shifted toward mobile computing,' he says. 'Microsoft has been clobbered largely because it remained stuck trying to protect its core while the market shifted away.'

Nothing less than a revolution can help Microsoft retain its status as the world's top tech company, adds analyst Carmi Levy.

'Microsoft needs to replace its core OS and productivity software businesses, and as PCs give way to mobile devices as the dominant global platform, the urgency only grows,' he says. 'If Microsoft fails to establish sustainable, market-leading revenues in mobile, it could forever be relegated to niche status in the PC market.'

Microsoft leaders are trying to move in the mobile direction.

This week, they announced the KIN mobile-phone series aimed at social networkers. Later this year will see the first phones running Windows Phone 7, which is designed to be more attractive than both the iPhone and Google's Android platform for diverse groups of customers ranging from business users to serious gamers.

The company is said to be working on an iPad killer called the Courier, which features a dual-screen tablet. There's no word on when or if it will ever come to market - but when it does it will likely face stiff competition not only from the iPad but from many other tablets powered by Google's Android.

'You've got to walk before you can run,' says Levy, referring to Microsoft's late start in the mobile market. 'In this race, both Google and Apple are already far ahead.'