Microsoft update: Down but by no means out

For several years now Microsoft has been written off by friends and foes alike as a shuffling shadow of its former self, doomed to feed off the profits of past successes while it goes gentle into the good night of irrelevance. And yet Microsoft's profits remain enviable and its outlook far from bleak.

Microsoft, after all, has a history of making dramatic changes in direction, changes that have saved it more than once from software obscurity. This was hammered home to me over the past few days in conversations with executives from a broad spectrum of the technology industry: hardware, software, and media. Each has an interest in seeing Microsoft buried, yet each suggested that Microsoft is on the path to resurgence.

Although Microsoft's desperate legal maneuvering around Linux is a clear sign of failure and although its apparently aimless attempts to head off the Google threat don't inspire confidence, Microsoft's history can give us a pretty decent glimpse into its future. Most companies, big or small, struggle to change direction. In part this is because companies are programmed to listen to their best customers, as Clayton Christensen calls out, which may be a prescription for missing out on new opportunities even while effectively mining old ones.

Microsoft is routinely painted as a lumbering slave to its Office and Windows businesses, but it's also the company that turned on a dime when Bill Gates sounded the warning of the coming Internet tidal wave, and it has significantly expanded its Office business with SharePoint. Granted, Microsoft remains stunted in its Internet growth and has perhaps allowed its profit centers to obscure its vision of an increasingly mobile future--two failings that don't plague Google and Apple--but let's give Microsoft some credit.

After all, this is the company that went from calling open-source software "un-American" to embracing it on a large scale. It's also the company that killed Blackbird when it proved to be a dead-end and recently RIP'd its Courier tablet. Microsoft is also the company that has dumped several iterations of its mobile Windows to experiment with two iterations of a new mobile strategy: Kin and Windows Phone 7. The two will likely converge over time, but Microsoft is placing multiple bets.

O, yes, Microsoft has plenty of ailments, but it's not dead yet. Not even close. Whether "not dead" will translate into "alive and kicking" in significant markets like search and mobile remains to be seen, but let's hold off on premature eulogies for this competitor.

The living dead never looked so good.

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