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Microsoft Leaves Safety of PC Market

Bob Keefe

March 23, 2003

Mar. 23--REDMOND, Wash.--For a company that helped create the personal computer, it seems Microsoft Corp. wants to talk about anything these days but the PC.

And for good reason.

With PC sales slumping, the world's biggest software company is turning to everything from video game consoles to watches to help it maintain its status as one of the most successful technology companies ever.

With about 70 percent of its revenues still coming from software for traditional computers, Microsoft's ongoing diversification push is a gamble that puts a company that has grown accustomed to a monopoly in cutthroat competition with a host of adversaries.

But it has little choice. Personal computing is continuing a metamorphosis from desktops and laptops to tablets and palm-sized personal digital assistants, and eventually is destined for telephones and devices that are even smaller.

"Our business has evolved, and as a company we've realized we have to evolve too," said Microsoft's Roger Gulrajani, a director of some of the company's most unusual and ambitious new software projects.

Called SPOT, for Smart Personal Object Technology, the software being developed by Gulrajani's team promises to let users get news, weather and traffic reports and e-mail messages through their wristwatches and, eventually, other devices, using FM radio signals. Microsoft and several watchmakers plan to release the first products this year.

To be sure, the core of Microsoft's business remains software for traditional computers. What it's trying to do with its new ventures is make sure it remains No. 1, even if the idea of a traditional computer changes.

Connections between other recent or upcoming Microsoft projects and its core business are easy to see.

Microsoft's foray into making software for book-sized "tablet" computers and PDAs is a natural extension of the Windows applications so ubiquitous on today's desktop computers.

Its push into the video game console business with its popular but still unprofitable Xbox system is expected to help Microsoft eventually take its Internet applications and other software beyond consumers' home offices and into their living rooms.

Its expansion into the business of software for wireless phones, which has been limited to a less-than-booming rollout in October in Britain, is designed to make Microsoft programs such as Outlook, Internet Explorer, Media Player and MSN Instant Messaging as commonplace on telephones as they are on desktops.

"These devices... are all outside the traditional PC space, but they are still all very closely attached to the PC," said Ed Suwanjindar, lead product manager for Microsoft's mobile devices division.

This week, Microsoft Chairman Bill Gates will attend a wireless phone technology conference in New Orleans where the company is expected to make several new announcements aimed at extending its push into the wireless phone business even further.

Microsoft is trying to make deals with wireless carriers to put its software on their phones, but its push into the U.S. phone market has been hampered by stiff competition from giants such Nokia and Sony Ericsson Mobile Communications.

Of course Microsoft has tried -- and failed -- when it has strayed from the PC business before.

Its Microsoft TV (formerly called WebTV) interactive television business has been a flop. Likewise, a venture two years ago to sell movies on demand over the Internet in Atlanta and other cities failed.

What Microsoft has learned from its failures is that it has to make sure its new ventures are closely connected to its existing businesses, some analysts and others say.

That doesn't make Microsoft's ventures any less expensive, or its new competitors any less formidable.

With Xbox, it is banging heads with heavyweights such as Sony Corp. and Nintendo. As it continues to push into the wireless phone and PDA market, its competition from Nokia, Sony Ericsson and others probably will only get tougher.

But with $40 billion in cash on hand and one of the strongest and most recognizable businesses on the planet, Microsoft doesn't have to hit home runs with all its new ventures, either.

"Over all, any one of these things can fail and it probably won't be a huge problem for them," said Matt Rosoff, an analyst with Directions on Microsoft, a research firm based near Microsoft's headquarters.

"But if all these things fail, Microsoft will have a big problem."


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(c) 2003, The Palm Beach Post, Fla. Distributed by Knight Ridder/Tribune Business News.


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